Tilton v. SEC
This text of Tilton v. SEC (Tilton v. SEC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
15Ȭ2103ȱ Tiltonȱv.ȱSECȱ ȱ ŗȱ UNITEDȱSTATESȱCOURTȱOFȱAPPEALSȱ Řȱ FORȱTHEȱSECONDȱCIRCUITȱ řȱ AugustȱTerm,ȱ2015ȱ 4ȱ (Argued:ȱȱSeptemberȱ16,ȱ2015ȱ Decided:ȱȱJuneȱ1,ȱ2016)ȱ śȱ DocketȱNo.ȱ15Ȭ2103ȱ
Ŝȱ ȱ 7ȱ LynnȱTilton,ȱPatriarchȱPartners,ȱLLC,ȱPatriarchȱPartnersȱVIII,ȱLLC,ȱ 8ȱ PatriarchȱPartnersȱXIV,ȱLLC,ȱandȱPatriarchȱPartnersȱXV,ȱLLC,ȱ 9ȱ PlaintiffsȬAppellants,ȱ
ŗŖȱ v.ȱ
ŗŗȱ SecuritiesȱandȱExchangeȱCommission,ȱ ŗŘȱ DefendantȬAppellee.ȱ ŗřȱ ȱ ŗ4ȱ Before:ȱ NEWMAN,ȱSACK,ȱandȱDRONEY,ȱCircuitȱJudges.ȱ
ŗśȱ Theȱappellants,ȱLynnȱTiltonȱandȱseveralȱofȱherȱinvestmentȱfirms,ȱareȱ
ŗŜȱ respondentsȱinȱanȱongoingȱadministrativeȱproceedingȱinitiatedȱbyȱtheȱSecuritiesȱ
ŗ7ȱ andȱExchangeȱCommissionȱandȱconductedȱbyȱanȱadministrativeȱlawȱjudge.ȱȱTheyȱ
ŗ8ȱ broughtȱsuitȱinȱtheȱUnitedȱStatesȱDistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱ
ŗ9ȱ YorkȱtoȱenjoinȱtheȱCommissionȇsȱproceedingȱbeforeȱitsȱcompletion,ȱonȱtheȱtheoryȱ
ŘŖȱ thatȱtheȱadministrativeȱlawȱjudgeȇsȱappointmentȱviolatedȱtheȱAppointmentsȱ
Řŗȱ ClauseȱofȱArticleȱIIȱofȱtheȱUnitedȱStatesȱConstitution.ȱȱTheȱdistrictȱcourtȱ(Ronnieȱ
ŘŘȱ Abrams,ȱJudge)ȱdismissedȱtheȱsuitȱforȱlackȱofȱsubjectȱmatterȱjurisdiction.ȱȱTheȱ ŗȱ appellantsȱnowȱaskȱusȱtoȱoverturnȱthatȱdismissalȱandȱreachȱtheȱmeritsȱofȱtheirȱ
Řȱ constitutionalȱargument.ȱȱWeȱagreeȱwithȱtheȱdistrictȱcourt,ȱhowever,ȱthatȱ
řȱ Congressȱimplicitlyȱprecludedȱfederalȱjurisdictionȱoverȱtheȱappellantsȇȱ
4ȱ AppointmentsȱClauseȱclaimȱwhileȱtheȱCommissionȇsȱproceedingȱremainsȱ
śȱ pending.ȱȱTheȱjudgmentȱofȱtheȱdistrictȱcourtȱisȱthereforeȱ
Ŝȱ AFFIRMED.ȱ
7ȱ JudgeȱNEWMANȱconcursȱinȱaȱseparateȱopinion.ȱȱȱ
8ȱ JudgeȱDRONEYȱdissentsȱinȱaȱseparateȱopinion.ȱ
9ȱ DAVIDȱM.ȱZORNOW,ȱSkadden,ȱArps,ȱ ŗŖȱ Slate,ȱMeagherȱ&ȱFlomȱLLP,ȱNewȱYork,ȱNYȱ ŗŗȱ (ChristopherȱJ.ȱGunther,ȱonȱtheȱbrief),ȱforȱ ŗŘȱ PlaintiffsȬAppellants.ȱ ŗřȱ SusanȱE.ȱBruneȱ(onȱtheȱbrief),ȱBruneȱ&ȱ ŗ4ȱ RichardȱLLP,ȱNewȱYork,ȱNY,ȱforȱPlaintiffsȬ ŗśȱ Appellants.ȱ ŗŜȱ MARKȱB.ȱSTERN,ȱAppellateȱStaffȱAttorneyȱ ŗ7ȱ (MarkȱR.ȱFreemanȱandȱMeganȱBarbero,ȱ ŗ8ȱ AppellateȱStaffȱAttorneys,ȱonȱtheȱbrief),ȱforȱ ŗ9ȱ BenjaminȱC.ȱMizer,ȱPrincipalȱDeputyȱȱ ŘŖȱ AssistantȱAttorneyȱGeneral,ȱandȱBethȱS.ȱ Řŗȱ Brinkmann,ȱDeputyȱAssistantȱAttorneyȱ ŘŘȱ General,ȱUnitedȱStatesȱDepartmentȱofȱ Řřȱ Justice,ȱWashington,ȱDC,ȱforȱDefendantȬ Ř4ȱ Appellee.ȱ Řśȱ JeannetteȱA.ȱVargasȱ(onȱtheȱbrief),ȱforȱPreetȱ ŘŜȱ Bharara,ȱUnitedȱStatesȱAttorneyȱforȱtheȱ
Ř ŗȱ SouthernȱDistrictȱofȱNewȱYork,ȱforȱ Řȱ DefendantȬAppellee.ȱ řȱ ȱ 4ȱ SACK,ȱCircuitȱJudge:ȱ
śȱ TheȱSecuritiesȱandȱExchangeȱCommissionȱ(theȱȈSECȈȱorȱtheȱȈCommissionȈ)ȱ
Ŝȱ enforcesȱtheȱfederalȱsecuritiesȱlawsȱby,ȱamongȱotherȱthings,ȱfilingȱactionsȱseekingȱ
7ȱ monetaryȱpenaltiesȱagainstȱallegedȱtransgressors.ȱȱUnderȱtheȱ2010ȱDoddȬFrankȱ
8ȱ WallȱStreetȱReformȱandȱConsumerȱProtectionȱActȱ(theȱȈDoddȬFrankȱActȈ),ȱPub.ȱL.ȱ
9ȱ No.ȱ111Ȭ203,ȱ12ŮȱStat.ȱ13ű6,ȱtheȱSECȇsȱenforcementȱactionsȱgenerallyȱmayȱtakeȱ
ŗŖȱ eitherȱofȱtwoȱforms:ȱaȱcivilȱlawsuitȱinȱfederalȱdistrictȱcourt,ȱorȱanȱadministrativeȱ
ŗŗȱ proceedingȱconductedȱbyȱtheȱCommissionȱorȱanȱadministrativeȱlawȱjudgeȱ
ŗŘȱ (ȈALJȈ).ȱȱWhereȱbothȱofȱthoseȱalternativesȱareȱavailable,ȱtheȱchoiceȱbetweenȱthemȱ
ŗřȱ belongsȱtoȱtheȱSECȱwithoutȱexpressȱstatutoryȱconstraint.ȱ
ŗ4ȱ Inȱthisȱcase,ȱtheȱSECȱchoseȱtoȱseekȱpenaltiesȱagainstȱtheȱappellants,ȱLynnȱ
ŗśȱ Tiltonȱandȱseveralȱofȱherȱinvestmentȱfirms,ȱbyȱcommencingȱanȱadministrativeȱ
ŗŜȱ proceedingȱconductedȱbyȱanȱALJ.ȱȱThatȱproceedingȱisȱsubjectȱtoȱtwoȱlayersȱofȱ
ŗ7ȱ review:ȱȱAȱpartyȱthatȱlosesȱbeforeȱtheȱALJȱmayȱpetitionȱforȱdeȱnovoȱreviewȱbyȱtheȱ
ŗ8ȱ Commission,ȱandȱaȱpartyȱthatȱlosesȱbeforeȱtheȱCommissionȱmayȱpetitionȱforȱ
ŗ9ȱ reviewȱbyȱaȱfederalȱcourtȱofȱappeals.ȱȱNotȱunlikeȱaȱlawsuitȱinȱdistrictȱcourt,ȱ
ř ŗȱ therefore,ȱtheȱadministrativeȱproceedingȱultimatelyȱoffersȱtheȱlosingȱpartyȱaȱrouteȱ
Řȱ toȱfederalȱappellateȱreview.ȱ
řȱ TheȱappellantsȱcontendȱthatȱtheȱSECȇsȱadministrativeȱproceedingȱisȱ
4ȱ unconstitutionalȱbecauseȱtheȱpresidingȱALJȇsȱappointmentȱviolatedȱArticleȱIIȇsȱ
śȱ AppointmentsȱClause.ȱȱTheyȱhaveȱraisedȱthatȱclaimȱasȱanȱaffirmativeȱdefenseȱ
Ŝȱ withinȱtheȱproceedingȱandȱwillȱbeȱableȱtoȱargueȱtheȱissueȱinȱaȱfederalȱcourtȱofȱ
7ȱ appealsȱifȱtheyȱloseȱbeforeȱtheȱCommission.ȱȱTheȱappellantsȱneverthelessȱsoughtȱ
8ȱ moreȱimmediateȱaccessȱtoȱfederalȱcourt:ȱȱTwoȱdaysȱafterȱtheȱadministrativeȱ
9ȱ proceedingȱagainstȱthemȱbegan,ȱtheyȱfiledȱaȱseparateȱlawsuitȱinȱtheȱUnitedȱStatesȱ
ŗŖȱ DistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱYorkȱassertingȱtheirȱ
ŗŗȱ AppointmentsȱClauseȱclaimȱandȱseekingȱanȱinjunctionȱagainstȱtheȱALJȇsȱ
ŗŘȱ adjudicationȱbasedȱonȱitsȱallegedȱunconstitutionality.ȱ
ŗřȱ Theȱdistrictȱcourtȱ(RonnieȱAbrams,ȱJudge)ȱdismissedȱtheȱsuitȱforȱlackȱofȱ
ŗ4ȱ subjectȱmatterȱjurisdiction.ȱȱRelyingȱinȱpartȱonȱtheȱSupremeȱCourtȇsȱdecisionsȱinȱ
ŗśȱ Elginȱv.ȱDepartmentȱofȱTreasury,ȱȬȬȬȱU.S.ȱȬȬȬ,ȱ132ȱS.ȱCt.ȱ2126ȱ(2012),ȱFreeȱEnterpriseȱ
ŗŜȱ Fundȱv.ȱPublicȱCo.ȱAccountingȱOversightȱBoard,ȱ561ȱU.S.ȱŮűűȱ(2010),ȱandȱThunderȱ
ŗ7ȱ BasinȱCoalȱCo.ȱv.ȱReich,ȱ510ȱU.S.ȱ200ȱ(1ųųŮ),ȱtheȱcourtȱconcludedȱthatȱtheȱ
ŗ8ȱ appellantsȇȱAppointmentsȱClauseȱchallengeȱfellȱwithinȱtheȱexclusiveȱscopeȱofȱtheȱ
4 ŗȱ SECȇsȱadministrativeȱreviewȱschemeȱandȱcouldȱreachȱaȱfederalȱcourtȱonlyȱonȱ
Řȱ petitionȱforȱreviewȱofȱaȱfinalȱdecisionȱbyȱtheȱCommission.ȱ
řȱ Weȱagree.ȱȱByȱenactingȱtheȱSECȇsȱcomprehensiveȱschemeȱofȱadministrativeȱ
4ȱ andȱjudicialȱreview,ȱCongressȱimplicitlyȱprecludedȱfederalȱdistrictȱcourtȱ
śȱ jurisdictionȱoverȱtheȱappellantsȇȱconstitutionalȱchallenge.ȱ
Ŝȱ BACKGROUNDȱ
7ȱ Untilȱ2010,ȱtheȱSECȇsȱauthorityȱtoȱimposeȱmonetaryȱpenaltiesȱthroughȱ
8ȱ administrativeȱproceedingsȱwasȱrelativelyȱlimited.ȱȱTheȱagencyȱcouldȱnot,ȱforȱ
9ȱ example,ȱpenalizeȱaȱnonȬregulatedȱpersonȱsuchȱasȱTiltonȱthroughȱadministrativeȱ
ŗŖȱ channels.ȱȱTheȱDoddȬFrankȱActȱdramaticallyȱexpandedȱtheȱSECȇsȱauthorityȱtoȱ
ŗŗȱ imposeȱpenaltiesȱadministratively,ȱmakingȱitȱessentiallyȱ“coextensiveȱwithȱ[theȱ
ŗŘȱ SEC’s]ȱauthorityȱtoȱseekȱpenaltiesȱinȱFederalȱcourt.”ȱȱH.R.ȱRep.ȱNo.ȱ111–6Ųű,ȱatȱűŲȱ
ŗřȱ (2010).ȱȱSinceȱthen,ȱtheȱSECȱhasȱreportedlyȱprosecutedȱanȱincreasingȱnumberȱofȱ
ŗ4ȱ casesȱthroughȱadministrativeȱproceedings,ȱwithȱaȱrateȱofȱsuccessȱnotablyȱhigherȱ
ŗśȱ thanȱitȱhasȱachievedȱinȱfederalȱdistrictȱcourts.ȱȱSeeȱJeanȱEaglesham,ȱInȬHouseȱ
ŗŜȱ JudgesȱHelpȱSECȱRackȱUpȱWins,ȱWallȱSt.ȱJ.,ȱMayȱű,ȱ2015,ȱatȱA1.ȱ
ŗ7ȱ WhenȱtheȱCommissionȱchoosesȱtoȱseekȱpenaltiesȱadministratively,ȱitȱmustȱ
ŗ8ȱ eitherȱpresideȱoverȱtheȱproceedingȱitselfȱorȱdesignateȱaȱhearingȱofficerȱ—ȱusuallyȱ
ś ŗȱ anȱALJȱ—ȱtoȱdoȱso.ȱȱSeeȱ1űȱC.F.R.ȱ§ȱ201.110.ȱȱAȱpresidingȱALJȱhasȱauthorityȱtoȱ
Řȱ issueȱanȱinitialȱdecision,ȱwhichȱmayȱbecomeȱfinalȱonlyȱbyȱorderȱofȱtheȱ
řȱ Commission.ȱȱSeeȱid.ȱ§ȱ201.360.ȱȱIfȱaȱpartyȱpetitionsȱforȱreviewȱofȱtheȱALJȇsȱinitialȱ
4ȱ decision,ȱtheȱCommissionȱordinarilyȱreviewsȱtheȱdecisionȱdeȱnovoȱbeforeȱissuingȱaȱ
śȱ finalȱorder.ȱȱSeeȱid.ȱ§ȱ201.Ů11.ȱȱAndȱaȱfinalȱorderȱissuedȱunderȱtheȱsecuritiesȱlaws,ȱ
Ŝȱ includingȱtheȱInvestmentȱAdvisersȱActȱofȱ1ųŮ0,ȱ15ȱU.S.C.ȱ§ȱŲ0bȬ1ȱetȱseq.,ȱisȱinȱturnȱ
7ȱ subjectȱtoȱjudicialȱreviewȱbyȱaȱfederalȱcourtȱofȱappeals,ȱseeȱid.ȱ§ȱŲ0b–13(a)ȱ
8ȱ (providingȱthatȱȈ[a]nyȱpersonȱorȱpartyȱaggrievedȱbyȱanȱorderȱissuedȱbyȱtheȱ
9ȱ Commissionȱunderȱ[theȱInvestmentȱAdvisersȱAct]ȱmayȱobtainȱaȱreviewȱofȱsuchȱ
ŗŖȱ orderȱinȱtheȱUnitedȱStatesȱcourtȱofȱappealsȱwithinȱanyȱcircuitȱwhereinȱsuchȱ
ŗŗȱ personȱresidesȱorȱhasȱhisȱprincipalȱofficeȱorȱplaceȱofȱbusiness,ȱorȱinȱtheȱUnitedȱ
Free access — add to your briefcase to read the full text and ask questions with AI
15Ȭ2103ȱ Tiltonȱv.ȱSECȱ ȱ ŗȱ UNITEDȱSTATESȱCOURTȱOFȱAPPEALSȱ Řȱ FORȱTHEȱSECONDȱCIRCUITȱ řȱ AugustȱTerm,ȱ2015ȱ 4ȱ (Argued:ȱȱSeptemberȱ16,ȱ2015ȱ Decided:ȱȱJuneȱ1,ȱ2016)ȱ śȱ DocketȱNo.ȱ15Ȭ2103ȱ
Ŝȱ ȱ 7ȱ LynnȱTilton,ȱPatriarchȱPartners,ȱLLC,ȱPatriarchȱPartnersȱVIII,ȱLLC,ȱ 8ȱ PatriarchȱPartnersȱXIV,ȱLLC,ȱandȱPatriarchȱPartnersȱXV,ȱLLC,ȱ 9ȱ PlaintiffsȬAppellants,ȱ
ŗŖȱ v.ȱ
ŗŗȱ SecuritiesȱandȱExchangeȱCommission,ȱ ŗŘȱ DefendantȬAppellee.ȱ ŗřȱ ȱ ŗ4ȱ Before:ȱ NEWMAN,ȱSACK,ȱandȱDRONEY,ȱCircuitȱJudges.ȱ
ŗśȱ Theȱappellants,ȱLynnȱTiltonȱandȱseveralȱofȱherȱinvestmentȱfirms,ȱareȱ
ŗŜȱ respondentsȱinȱanȱongoingȱadministrativeȱproceedingȱinitiatedȱbyȱtheȱSecuritiesȱ
ŗ7ȱ andȱExchangeȱCommissionȱandȱconductedȱbyȱanȱadministrativeȱlawȱjudge.ȱȱTheyȱ
ŗ8ȱ broughtȱsuitȱinȱtheȱUnitedȱStatesȱDistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱ
ŗ9ȱ YorkȱtoȱenjoinȱtheȱCommissionȇsȱproceedingȱbeforeȱitsȱcompletion,ȱonȱtheȱtheoryȱ
ŘŖȱ thatȱtheȱadministrativeȱlawȱjudgeȇsȱappointmentȱviolatedȱtheȱAppointmentsȱ
Řŗȱ ClauseȱofȱArticleȱIIȱofȱtheȱUnitedȱStatesȱConstitution.ȱȱTheȱdistrictȱcourtȱ(Ronnieȱ
ŘŘȱ Abrams,ȱJudge)ȱdismissedȱtheȱsuitȱforȱlackȱofȱsubjectȱmatterȱjurisdiction.ȱȱTheȱ ŗȱ appellantsȱnowȱaskȱusȱtoȱoverturnȱthatȱdismissalȱandȱreachȱtheȱmeritsȱofȱtheirȱ
Řȱ constitutionalȱargument.ȱȱWeȱagreeȱwithȱtheȱdistrictȱcourt,ȱhowever,ȱthatȱ
řȱ Congressȱimplicitlyȱprecludedȱfederalȱjurisdictionȱoverȱtheȱappellantsȇȱ
4ȱ AppointmentsȱClauseȱclaimȱwhileȱtheȱCommissionȇsȱproceedingȱremainsȱ
śȱ pending.ȱȱTheȱjudgmentȱofȱtheȱdistrictȱcourtȱisȱthereforeȱ
Ŝȱ AFFIRMED.ȱ
7ȱ JudgeȱNEWMANȱconcursȱinȱaȱseparateȱopinion.ȱȱȱ
8ȱ JudgeȱDRONEYȱdissentsȱinȱaȱseparateȱopinion.ȱ
9ȱ DAVIDȱM.ȱZORNOW,ȱSkadden,ȱArps,ȱ ŗŖȱ Slate,ȱMeagherȱ&ȱFlomȱLLP,ȱNewȱYork,ȱNYȱ ŗŗȱ (ChristopherȱJ.ȱGunther,ȱonȱtheȱbrief),ȱforȱ ŗŘȱ PlaintiffsȬAppellants.ȱ ŗřȱ SusanȱE.ȱBruneȱ(onȱtheȱbrief),ȱBruneȱ&ȱ ŗ4ȱ RichardȱLLP,ȱNewȱYork,ȱNY,ȱforȱPlaintiffsȬ ŗśȱ Appellants.ȱ ŗŜȱ MARKȱB.ȱSTERN,ȱAppellateȱStaffȱAttorneyȱ ŗ7ȱ (MarkȱR.ȱFreemanȱandȱMeganȱBarbero,ȱ ŗ8ȱ AppellateȱStaffȱAttorneys,ȱonȱtheȱbrief),ȱforȱ ŗ9ȱ BenjaminȱC.ȱMizer,ȱPrincipalȱDeputyȱȱ ŘŖȱ AssistantȱAttorneyȱGeneral,ȱandȱBethȱS.ȱ Řŗȱ Brinkmann,ȱDeputyȱAssistantȱAttorneyȱ ŘŘȱ General,ȱUnitedȱStatesȱDepartmentȱofȱ Řřȱ Justice,ȱWashington,ȱDC,ȱforȱDefendantȬ Ř4ȱ Appellee.ȱ Řśȱ JeannetteȱA.ȱVargasȱ(onȱtheȱbrief),ȱforȱPreetȱ ŘŜȱ Bharara,ȱUnitedȱStatesȱAttorneyȱforȱtheȱ
Ř ŗȱ SouthernȱDistrictȱofȱNewȱYork,ȱforȱ Řȱ DefendantȬAppellee.ȱ řȱ ȱ 4ȱ SACK,ȱCircuitȱJudge:ȱ
śȱ TheȱSecuritiesȱandȱExchangeȱCommissionȱ(theȱȈSECȈȱorȱtheȱȈCommissionȈ)ȱ
Ŝȱ enforcesȱtheȱfederalȱsecuritiesȱlawsȱby,ȱamongȱotherȱthings,ȱfilingȱactionsȱseekingȱ
7ȱ monetaryȱpenaltiesȱagainstȱallegedȱtransgressors.ȱȱUnderȱtheȱ2010ȱDoddȬFrankȱ
8ȱ WallȱStreetȱReformȱandȱConsumerȱProtectionȱActȱ(theȱȈDoddȬFrankȱActȈ),ȱPub.ȱL.ȱ
9ȱ No.ȱ111Ȭ203,ȱ12ŮȱStat.ȱ13ű6,ȱtheȱSECȇsȱenforcementȱactionsȱgenerallyȱmayȱtakeȱ
ŗŖȱ eitherȱofȱtwoȱforms:ȱaȱcivilȱlawsuitȱinȱfederalȱdistrictȱcourt,ȱorȱanȱadministrativeȱ
ŗŗȱ proceedingȱconductedȱbyȱtheȱCommissionȱorȱanȱadministrativeȱlawȱjudgeȱ
ŗŘȱ (ȈALJȈ).ȱȱWhereȱbothȱofȱthoseȱalternativesȱareȱavailable,ȱtheȱchoiceȱbetweenȱthemȱ
ŗřȱ belongsȱtoȱtheȱSECȱwithoutȱexpressȱstatutoryȱconstraint.ȱ
ŗ4ȱ Inȱthisȱcase,ȱtheȱSECȱchoseȱtoȱseekȱpenaltiesȱagainstȱtheȱappellants,ȱLynnȱ
ŗśȱ Tiltonȱandȱseveralȱofȱherȱinvestmentȱfirms,ȱbyȱcommencingȱanȱadministrativeȱ
ŗŜȱ proceedingȱconductedȱbyȱanȱALJ.ȱȱThatȱproceedingȱisȱsubjectȱtoȱtwoȱlayersȱofȱ
ŗ7ȱ review:ȱȱAȱpartyȱthatȱlosesȱbeforeȱtheȱALJȱmayȱpetitionȱforȱdeȱnovoȱreviewȱbyȱtheȱ
ŗ8ȱ Commission,ȱandȱaȱpartyȱthatȱlosesȱbeforeȱtheȱCommissionȱmayȱpetitionȱforȱ
ŗ9ȱ reviewȱbyȱaȱfederalȱcourtȱofȱappeals.ȱȱNotȱunlikeȱaȱlawsuitȱinȱdistrictȱcourt,ȱ
ř ŗȱ therefore,ȱtheȱadministrativeȱproceedingȱultimatelyȱoffersȱtheȱlosingȱpartyȱaȱrouteȱ
Řȱ toȱfederalȱappellateȱreview.ȱ
řȱ TheȱappellantsȱcontendȱthatȱtheȱSECȇsȱadministrativeȱproceedingȱisȱ
4ȱ unconstitutionalȱbecauseȱtheȱpresidingȱALJȇsȱappointmentȱviolatedȱArticleȱIIȇsȱ
śȱ AppointmentsȱClause.ȱȱTheyȱhaveȱraisedȱthatȱclaimȱasȱanȱaffirmativeȱdefenseȱ
Ŝȱ withinȱtheȱproceedingȱandȱwillȱbeȱableȱtoȱargueȱtheȱissueȱinȱaȱfederalȱcourtȱofȱ
7ȱ appealsȱifȱtheyȱloseȱbeforeȱtheȱCommission.ȱȱTheȱappellantsȱneverthelessȱsoughtȱ
8ȱ moreȱimmediateȱaccessȱtoȱfederalȱcourt:ȱȱTwoȱdaysȱafterȱtheȱadministrativeȱ
9ȱ proceedingȱagainstȱthemȱbegan,ȱtheyȱfiledȱaȱseparateȱlawsuitȱinȱtheȱUnitedȱStatesȱ
ŗŖȱ DistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱYorkȱassertingȱtheirȱ
ŗŗȱ AppointmentsȱClauseȱclaimȱandȱseekingȱanȱinjunctionȱagainstȱtheȱALJȇsȱ
ŗŘȱ adjudicationȱbasedȱonȱitsȱallegedȱunconstitutionality.ȱ
ŗřȱ Theȱdistrictȱcourtȱ(RonnieȱAbrams,ȱJudge)ȱdismissedȱtheȱsuitȱforȱlackȱofȱ
ŗ4ȱ subjectȱmatterȱjurisdiction.ȱȱRelyingȱinȱpartȱonȱtheȱSupremeȱCourtȇsȱdecisionsȱinȱ
ŗśȱ Elginȱv.ȱDepartmentȱofȱTreasury,ȱȬȬȬȱU.S.ȱȬȬȬ,ȱ132ȱS.ȱCt.ȱ2126ȱ(2012),ȱFreeȱEnterpriseȱ
ŗŜȱ Fundȱv.ȱPublicȱCo.ȱAccountingȱOversightȱBoard,ȱ561ȱU.S.ȱŮűűȱ(2010),ȱandȱThunderȱ
ŗ7ȱ BasinȱCoalȱCo.ȱv.ȱReich,ȱ510ȱU.S.ȱ200ȱ(1ųųŮ),ȱtheȱcourtȱconcludedȱthatȱtheȱ
ŗ8ȱ appellantsȇȱAppointmentsȱClauseȱchallengeȱfellȱwithinȱtheȱexclusiveȱscopeȱofȱtheȱ
4 ŗȱ SECȇsȱadministrativeȱreviewȱschemeȱandȱcouldȱreachȱaȱfederalȱcourtȱonlyȱonȱ
Řȱ petitionȱforȱreviewȱofȱaȱfinalȱdecisionȱbyȱtheȱCommission.ȱ
řȱ Weȱagree.ȱȱByȱenactingȱtheȱSECȇsȱcomprehensiveȱschemeȱofȱadministrativeȱ
4ȱ andȱjudicialȱreview,ȱCongressȱimplicitlyȱprecludedȱfederalȱdistrictȱcourtȱ
śȱ jurisdictionȱoverȱtheȱappellantsȇȱconstitutionalȱchallenge.ȱ
Ŝȱ BACKGROUNDȱ
7ȱ Untilȱ2010,ȱtheȱSECȇsȱauthorityȱtoȱimposeȱmonetaryȱpenaltiesȱthroughȱ
8ȱ administrativeȱproceedingsȱwasȱrelativelyȱlimited.ȱȱTheȱagencyȱcouldȱnot,ȱforȱ
9ȱ example,ȱpenalizeȱaȱnonȬregulatedȱpersonȱsuchȱasȱTiltonȱthroughȱadministrativeȱ
ŗŖȱ channels.ȱȱTheȱDoddȬFrankȱActȱdramaticallyȱexpandedȱtheȱSECȇsȱauthorityȱtoȱ
ŗŗȱ imposeȱpenaltiesȱadministratively,ȱmakingȱitȱessentiallyȱ“coextensiveȱwithȱ[theȱ
ŗŘȱ SEC’s]ȱauthorityȱtoȱseekȱpenaltiesȱinȱFederalȱcourt.”ȱȱH.R.ȱRep.ȱNo.ȱ111–6Ųű,ȱatȱűŲȱ
ŗřȱ (2010).ȱȱSinceȱthen,ȱtheȱSECȱhasȱreportedlyȱprosecutedȱanȱincreasingȱnumberȱofȱ
ŗ4ȱ casesȱthroughȱadministrativeȱproceedings,ȱwithȱaȱrateȱofȱsuccessȱnotablyȱhigherȱ
ŗśȱ thanȱitȱhasȱachievedȱinȱfederalȱdistrictȱcourts.ȱȱSeeȱJeanȱEaglesham,ȱInȬHouseȱ
ŗŜȱ JudgesȱHelpȱSECȱRackȱUpȱWins,ȱWallȱSt.ȱJ.,ȱMayȱű,ȱ2015,ȱatȱA1.ȱ
ŗ7ȱ WhenȱtheȱCommissionȱchoosesȱtoȱseekȱpenaltiesȱadministratively,ȱitȱmustȱ
ŗ8ȱ eitherȱpresideȱoverȱtheȱproceedingȱitselfȱorȱdesignateȱaȱhearingȱofficerȱ—ȱusuallyȱ
ś ŗȱ anȱALJȱ—ȱtoȱdoȱso.ȱȱSeeȱ1űȱC.F.R.ȱ§ȱ201.110.ȱȱAȱpresidingȱALJȱhasȱauthorityȱtoȱ
Řȱ issueȱanȱinitialȱdecision,ȱwhichȱmayȱbecomeȱfinalȱonlyȱbyȱorderȱofȱtheȱ
řȱ Commission.ȱȱSeeȱid.ȱ§ȱ201.360.ȱȱIfȱaȱpartyȱpetitionsȱforȱreviewȱofȱtheȱALJȇsȱinitialȱ
4ȱ decision,ȱtheȱCommissionȱordinarilyȱreviewsȱtheȱdecisionȱdeȱnovoȱbeforeȱissuingȱaȱ
śȱ finalȱorder.ȱȱSeeȱid.ȱ§ȱ201.Ů11.ȱȱAndȱaȱfinalȱorderȱissuedȱunderȱtheȱsecuritiesȱlaws,ȱ
Ŝȱ includingȱtheȱInvestmentȱAdvisersȱActȱofȱ1ųŮ0,ȱ15ȱU.S.C.ȱ§ȱŲ0bȬ1ȱetȱseq.,ȱisȱinȱturnȱ
7ȱ subjectȱtoȱjudicialȱreviewȱbyȱaȱfederalȱcourtȱofȱappeals,ȱseeȱid.ȱ§ȱŲ0b–13(a)ȱ
8ȱ (providingȱthatȱȈ[a]nyȱpersonȱorȱpartyȱaggrievedȱbyȱanȱorderȱissuedȱbyȱtheȱ
9ȱ Commissionȱunderȱ[theȱInvestmentȱAdvisersȱAct]ȱmayȱobtainȱaȱreviewȱofȱsuchȱ
ŗŖȱ orderȱinȱtheȱUnitedȱStatesȱcourtȱofȱappealsȱwithinȱanyȱcircuitȱwhereinȱsuchȱ
ŗŗȱ personȱresidesȱorȱhasȱhisȱprincipalȱofficeȱorȱplaceȱofȱbusiness,ȱorȱinȱtheȱUnitedȱ
ŗŘȱ StatesȱCourtȱofȱAppealsȱforȱtheȱDistrictȱofȱColumbiaȈ).ȱ
ŗřȱ Duringȱtheȱpastȱyearȱorȱso,ȱseveralȱrespondentsȱinȱongoingȱSECȱ
ŗ4ȱ administrativeȱproceedingsȱhaveȱassertedȱthatȱArticleȱIIȱofȱtheȱUnitedȱStatesȱ
ŗśȱ ConstitutionȱbarsȱtheȱagencyȇsȱALJsȱfromȱactingȱasȱhearingȱofficers.ȱȱTheseȱ
ŗŜȱ respondentsȱhaveȱmadeȱtwoȱdistinctȱconstitutionalȱarguments:ȱthatȱtheȱALJsȱareȱ
ŗ7ȱ impermissiblyȱinsulatedȱfromȱpresidentialȱremoval,ȱandȱthatȱtheyȱwereȱnotȱ
Ŝ ŗȱ appointedȱinȱaccordanceȱwithȱtheȱAppointmentsȱClause.ŗȱȱRespondentsȱmayȱ
Řȱ raiseȱthoseȱargumentsȱasȱaffirmativeȱdefensesȱduringȱtheȱcourseȱofȱtheirȱ
řȱ administrativeȱproceedings,ȱsubjectȱtoȱpotentialȱjudicialȱreviewȱinȱtheȱeventȱofȱanȱ
4ȱ adverseȱdecisionȱbyȱtheȱCommission.ȱȱSeekingȱmoreȱimmediateȱjudicialȱscrutiny,ȱ
śȱ however,ȱsomeȱrespondentsȱ—ȱtheȱappellantsȱamongȱthemȱ—ȱattemptedȱtoȱraiseȱ
Ŝȱ theirȱArticleȱIIȱclaimsȱinȱparallelȱactionsȱbroughtȱinȱfederalȱdistrictȱcourtsȱbeforeȱ
7ȱ theirȱadministrativeȱproceedingsȱconcluded.ȱȱSeeȱSpringȱHillȱCapitalȱPartners,ȱLLCȱ
8ȱ v.ȱSEC,ȱNo.ȱ15ȬCVȬŮ5Ů2ȱ(S.D.N.Y.ȱ2015)ȱ(challengingȱALJȇsȱappointment);ȱHillȱv.ȱ
9ȱ SEC,ȱNo.ȱ1:15ȬCVȬ1Ų01ȱ(N.D.ȱGa.ȱ2015)ȱ(challengingȱALJȇsȱappointmentȱandȱ
ŗŖȱ insulationȱfromȱremoval);ȱDukaȱv.ȱSEC,ȱNo.ȱ15ȬCVȬ35űȱ(S.D.N.Y.ȱ2015)ȱ
ŗŗȱ (challengingȱALJȇsȱappointmentȱandȱinsulationȱfromȱremoval);ȱBeboȱv.ȱSEC,ȱNo.ȱ
ŗŘȱ 15ȬCȬ3ȱ(E.D.ȱWis.ȱ2015)ȱ(challengingȱALJȇsȱinsulationȱfromȱremoval).ȱ
ŗ ȱTheȱAppointmentsȱClauseȱreadsȱinȱpertinentȱpart:ȱȱȱ
[TheȱPresident]ȱshallȱnominate,ȱandȱbyȱandȱwithȱtheȱAdviceȱandȱConsentȱ ofȱtheȱSenate,ȱshallȱappointȱAmbassadors,ȱotherȱpublicȱMinistersȱandȱ Consuls,ȱJudgesȱofȱtheȱsupremeȱCourt,ȱandȱallȱotherȱOfficersȱofȱtheȱUnitedȱ States,ȱwhoseȱAppointmentsȱareȱnotȱhereinȱotherwiseȱprovidedȱfor,ȱandȱ whichȱshallȱbeȱestablishedȱbyȱLaw:ȱbutȱtheȱCongressȱmayȱbyȱLawȱvestȱtheȱ AppointmentȱofȱsuchȱinferiorȱOfficers,ȱasȱtheyȱthinkȱproper,ȱinȱtheȱ Presidentȱalone,ȱinȱtheȱCourtsȱofȱLaw,ȱorȱinȱtheȱHeadsȱofȱDepartments.ȱ U.S.ȱConst.ȱArt.ȱII,ȱ§ȱŘ,ȱcl.ȱŘ.ȱ
7 ŗȱ Inȱtheȱcaseȱatȱbar,ȱtheȱSECȱinitiatedȱanȱadministrativeȱproceedingȱbeforeȱanȱ
Řȱ ALJȱinȱMarchȱ2015,ȱallegingȱthatȱtheȱappellantsȱhadȱviolatedȱtheȱInvestmentȱ
řȱ AdvisersȱAct.ȱȱTwoȱdaysȱlater,ȱtheȱappellantsȱfiledȱthisȱlawsuitȱinȱtheȱUnitedȱ
4ȱ StatesȱDistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱYork.ȱȱTheyȱsoughtȱtoȱ
śȱ enjoinȱtheȱSECȇsȱadministrativeȱproceedingȱonȱtheȱgroundȱthat,ȱamongȱotherȱ
Ŝȱ things,ȱtheȱpresidingȱALJȇsȱappointmentȱviolatedȱtheȱAppointmentsȱClause.ŘȱȱTheȱ
7ȱ SECȱmovedȱtoȱdismissȱtheȱsuit,ȱarguingȱinȱpartȱ—ȱasȱitȱhasȱinȱcasesȱbroughtȱbyȱ
8ȱ similarlyȱsituatedȱrespondentsȱ—ȱthatȱtheȱdistrictȱcourtȱlackedȱsubjectȱmatterȱ
9ȱ jurisdictionȱoverȱtheȱlawsuit.ȱȱInȱtheȱCommissionȇsȱview,ȱtheȱadministrativeȱ
ŗŖȱ proceedingȱatȱissue,ȱonceȱbegun,ȱprecludedȱtheȱappellantsȇȱcollateralȱ
ŗŗȱ AppointmentsȱClauseȱchallenge.ȱ
ŗŘȱ Whileȱtheȱdistrictȱcourtȱheardȱargumentȱandȱdeliberated,ȱseveralȱotherȱ
ŗřȱ federalȱjudgesȱreachedȱconflictingȱdecisionsȱonȱtheȱsameȱjurisdictionalȱissue,ȱ
ŗ4ȱ creatingȱaȱsplitȱbothȱwithinȱandȱoutsideȱtheȱSouthernȱDistrict.ȱȱCompareȱSpringȱ
ŗśȱ Hill,ȱNo.ȱ15ȬCVȬŮ5Ů2ȱ(S.D.N.Y.ȱJuneȱ26,ȱ2015)ȱ(benchȱruling)ȱ(Ramos,ȱJ.)ȱ
ŗŜȱ (concludingȱthatȱtheȱcourtȱlackedȱjurisdictionȱoverȱaȱrespondentȇsȱArticleȱIIȱ ȱTheȱappellantsȱalsoȱarguedȱbeforeȱtheȱdistrictȱcourtȱthatȱtheirȱpresidingȱALJȱwasȱ Ř
impermissiblyȱinsulatedȱfromȱpresidentialȱremoval.ȱȱTheyȱhaveȱnotȱpressedȱthatȱ argumentȱonȱappeal,ȱalthoughȱtheyȱpurportȱtoȱhaveȱȈpreserve[d]Ȉȱit.ȱȱAppellantsȇȱBr.ȱatȱ řŗȱn.ŗŖ.ȱ
8 ŗȱ challengeȱtoȱtheȱALJȱconductingȱanȱongoingȱadministrativeȱproceeding),ȱwithȱHillȱ
Řȱ v.ȱSEC,ȱ11ŮȱF.ȱSupp.ȱ3dȱ12ųűȱ(N.D.ȱGa.ȱ2015)ȱ(concludingȱthatȱthereȱwasȱsuchȱ
řȱ jurisdiction),ȱandȱDukaȱv.ȱSEC,ȱ103ȱF.ȱSupp.ȱ3dȱ3Ų2,ȱ3ų2ȱ(S.D.N.Y.ȱ2015)ȱ(same);ȱseeȱ
4ȱ alsoȱBeboȱv.ȱSEC,ȱ2015ȱWLȱų053Ůų,ȱatȱ*Ů,ȱ2015ȱU.S.ȱDist.ȱLEXISȱ25660,ȱatȱ*10ȱ(E.D.ȱ
śȱ Wis.ȱMar.ȱ3,ȱ2015)ȱ(concluding,ȱbeforeȱtheȱcaseȱatȱbarȱwasȱfiled,ȱthatȱtheȱcourtȱ
Ŝȱ lackedȱjurisdictionȱoverȱaȱrespondentȇsȱArticleȱIIȱchallengeȱtoȱtheȱALJȱconductingȱ
7ȱ anȱongoingȱadministrativeȱproceeding),ȱaffȇd,ȱűųųȱF.3dȱű65ȱ(űthȱCir.ȱ2015).ȱȱOnȱ
8ȱ Juneȱ30,ȱ2015,ȱafterȱweighingȱtheȱmeritsȱofȱthoseȱinterveningȱdecisions,ȱtheȱ
9ȱ districtȱcourtȱdecidedȱinȱfavorȱofȱtheȱSEC,ȱdismissingȱtheȱappellantsȇȱsuitȱasȱ
ŗŖȱ implicitlyȱprecludedȱbyȱtheȱCommissionȇsȱstatutoryȱschemeȱofȱadministrativeȱ
ŗŗȱ andȱjudicialȱreview.ȱȱTiltonȱv.ȱSEC,ȱNo.ȱ15ȬCVȬ2Ůű2,ȱ2015ȱWLȱŮ006165,ȱatȱ*1,ȱ2015ȱ
ŗŘȱ U.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*2Ȭ3ȱ(S.D.N.Y.ȱJuneȱ30,ȱ2015).ȱ
ŗřȱ Theȱappellantsȱnowȱaskȱusȱtoȱreverseȱtheȱdistrictȱcourtȇsȱjurisdictionalȱ
ŗ4ȱ dismissalȱofȱtheirȱAppointmentsȱClauseȱclaimȱandȱrule,ȱonȱtheȱmerits,ȱthatȱtheȱ
ŗśȱ ALJȱpresidingȱoverȱtheirȱadministrativeȱproceedingȱwasȱunconstitutionallyȱ
ŗŜȱ appointed.ȱȱAtȱtheȱappellantsȇȱrequest,ȱweȱhaveȱstayedȱtheȱSECȇsȱproceedingȱ
ŗ7ȱ pendingȱourȱdecisionȱinȱthisȱappeal.ȱȱWeȱreviewȱtheȱdistrictȱcourtȇsȱdeterminationȱ
9 ŗȱ ofȱsubjectȱmatterȱjurisdictionȱdeȱnovo.ȱȱScelsaȱv.ȱCityȱUniv.ȱofȱN.Y.,ȱű6ȱF.3dȱ3ű,ȱŮ0ȱ
Řȱ (2dȱCir.ȱ1ųų6).ȱ
řȱ DISCUSSIONȱ
4ȱ TheȱstatutesȱthatȱestablishȱtheȱSECȇsȱschemeȱofȱadministrativeȱandȱjudicialȱ
śȱ review,ȱincludingȱtheȱDoddȬFrankȱActȱandȱtheȱInvestmentȱAdvisersȱAct,ȱdoȱnotȱ
Ŝȱ expresslyȱprecludeȱfederalȱdistrictȱcourtȱjurisdictionȱoverȱtheȱappellantsȇȱ
7ȱ AppointmentsȱClauseȱclaim.ȱȱTheȱcrucialȱjurisdictionalȱissueȱinȱthisȱcase,ȱ
8ȱ therefore,ȱisȱwhetherȱtheȱstatutesȱdoȱsoȱimplicitly.ȱȱȱ
9ȱ Toȱresolveȱthatȱissue,ȱweȱmustȱfirstȱdetermineȱwhetherȱitȱisȱȈfairlyȱ
ŗŖȱ discernibleȈȱfromȱtheȱȈtext,ȱstructure,ȱandȱpurposeȈȱofȱtheȱsecuritiesȱlawsȱthatȱ
ŗŗȱ CongressȱintendedȱtheȱSECȇsȱschemeȱofȱadministrativeȱandȱjudicialȱreviewȱȈtoȱ
ŗŘȱ precludeȱdistrictȱcourtȱjurisdiction.ȈȱȱElgin,ȱ132ȱS.ȱCt.ȱatȱ2132Ȭ33.ȱȱThatȱinitialȱ
ŗřȱ inquiryȱisȱguidedȱbyȱtheȱpropositionȱthatȱȈ[g]enerally,ȱwhenȱCongressȱcreatesȱ
ŗ4ȱ proceduresȱdesignedȱtoȱpermitȱagencyȱexpertiseȱtoȱbeȱbroughtȱtoȱbearȱonȱ
ŗśȱ particularȱproblems,ȱthoseȱproceduresȱareȱtoȱbeȱexclusive.ȈȱȱFreeȱEnterprise,ȱ561ȱ
ŗŜȱ U.S.ȱatȱŮŲųȱ(internalȱquotationȱmarksȱomitted).ȱȱȱ
ŗ7ȱ IfȱweȱconcludeȱthatȱtheȱSECȇsȱschemeȱprecludesȱdistrictȱcourtȱjurisdiction,ȱ
ŗ8ȱ weȱmustȱthenȱdecideȱwhetherȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱȈofȱ
ŗŖ ŗȱ theȱtypeȱCongressȱintendedȱtoȱbeȱreviewedȱwithinȱth[e]ȱstatutoryȱstructure.ȈȱȱId.ȱ
Řȱ (alterationȱinȱoriginal)ȱ(quotingȱThunderȱBasin,ȱ510ȱU.S.ȱatȱ20ű).ȱȱThisȱsecondȱ
řȱ inquiryȱisȱguidedȱbyȱtheȱSupremeȱCourtȇsȱdecisionsȱinȱThunderȱBasin,ȱFreeȱ
4ȱ EnterpriseȱandȱElgin,ȱwhichȱinstructȱusȱtoȱȈpresumeȈȱthatȱaȱclaimȱisȱnotȱconfinedȱ
śȱ toȱadministrativeȱchannelsȱȈifȱȇaȱfindingȱofȱpreclusionȱcouldȱforecloseȱallȱ
Ŝȱ meaningfulȱjudicialȱreviewȇ;ȱifȱtheȱsuitȱisȱȇwhollyȱcollateralȱtoȱaȱstatuteȇsȱreviewȱ
7ȱ provisionsȇ;ȱandȱifȱtheȱclaimsȱareȱȇoutsideȱtheȱagencyȇsȱexpertise.ȇȈȱȱId.ȱ(quotingȱ
8ȱ ThunderȱBasin,ȱ510ȱU.S.ȱatȱ212Ȭ13).ȱȱWeȱreferȱtoȱthoseȱconsiderationsȱasȱtheȱ
9ȱ ThunderȱBasinȱfactors.ȱ
ŗŖȱ Ourȱresolutionȱofȱtheseȱtwoȱinquiriesȱ—ȱwhetherȱCongressȱintendedȱtheȱ
ŗŗȱ SECȇsȱadministrativeȱschemeȱtoȱprecludeȱdistrictȱcourtȱjurisdiction,ȱandȱwhetherȱ
ŗŘȱ theȱschemeȱencompassesȱaȱrespondentȇsȱAppointmentsȱClauseȱchallengeȱtoȱaȱ
ŗřȱ presidingȱALJȱ—ȱleadsȱusȱtoȱconcludeȱthatȱtheȱappellantsȇȱlawsuitȱmustȱbeȱ
ŗ4ȱ dismissed.ȱȱTwoȱofȱourȱsisterȱcircuitsȱrecentlyȱreachedȱsimilarȱconclusions.ȱȱSeeȱ
ŗśȱ Jarkesyȱv.ȱSEC,ȱŲ03ȱF.3dȱųȱ(D.C.ȱCir.ȱ2015);ȱBeboȱv.ȱSEC,ȱűųųȱF.3dȱű65ȱ(űthȱCir.ȱ
ŗŜȱ 2015),ȱcert.ȱdenied,ȱ136ȱS.ȱCt.ȱ1500ȱ(2016).ȱȱWeȱagreeȱinȱlargeȱpartȱwithȱtheirȱ
ŗ7ȱ reasoning.ȱ
ŗ8ȱ ȱ
ŗŗ ŗȱ Iȱ
Řȱ Asȱanȱinitialȱmatter,ȱtheȱtext,ȱstructure,ȱandȱpurposeȱofȱtheȱsecuritiesȱlawsȱ
řȱ makeȱclearȱthatȱCongressȱintendedȱtheȱSECȇsȱschemeȱofȱadministrativeȱreviewȱtoȱ
4ȱ permitȱtheȱCommissionȱtoȱbringȱitsȱexpertiseȱtoȱbearȱinȱenforcingȱtheȱsecuritiesȱ
śȱ laws.ȱȱTheȱschemeȱenablesȱtheȱSECȇsȱDivisionȱofȱEnforcementȱtoȱbringȱstatutoryȱ
Ŝȱ chargesȱbeforeȱanȱadministrativeȱtribunalȱandȱaffordsȱrespondentsȱtheȱ
7ȱ opportunityȱtoȱgatherȱevidence,ȱpresentȱaȱdefense,ȱandȱappealȱanyȱadverseȱ
8ȱ rulingsȱinȱfederalȱcourt.ȱȱInȱThunderȱBasin,ȱtheȱSupremeȱCourtȱheldȱthatȱaȱsimilarȱ
9ȱ schemeȱprecludedȱfederalȱdistrictȱcourtȱjurisdictionȱoverȱchallengesȱtoȱanȱ
ŗŖȱ agencyȇsȱapplicationȱofȱaȱstatuteȱtoȱparticularȱfacts.ȱȱ510ȱU.S.ȱatȱ20ŲȬ0ų,ȱ216.ȱȱWeȱ
ŗŗȱ reachȱtheȱsameȱconclusionȱhere.ȱȱGenerally,ȱtherefore,ȱpersonsȱrespondingȱtoȱSECȱ
ŗŘȱ enforcementȱactionsȱareȱprecludedȱfromȱinitiatingȱlawsuitsȱinȱfederalȱcourtsȱasȱaȱ
ŗřȱ meansȱtoȱdefendȱagainstȱthem.ȱȱSeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ16Ȭ1űȱ(analogizingȱtheȱ
ŗ4ȱ SECȇsȱstatutoryȱreviewȱschemeȱtoȱtheȱschemeȱatȱissueȱinȱThunderȱBasinȱandȱ
ŗśȱ concludingȱthatȱCongressȱintendedȱȈtoȱprecludeȱsuitsȱ[inȱfederalȱcourts]ȱbyȱ
ŗŜȱ respondentsȱinȱSECȱadministrativeȱproceedingsȱinȱtheȱmineȬrunȱofȱcasesȈ).řȱ
ȱTheȱHillȱdecisionȱconcludedȱthatȱ“[t]hereȱcanȱbeȱnoȱȇfairlyȱdiscernibleȇȱCongressionalȱ ř
intentȱtoȱlimitȱjurisdictionȱawayȱfromȱdistrictȱcourtsȱwhenȱtheȱtextȱofȱtheȱstatuteȈȱ permitsȱtheȱSECȱtoȱinitiateȱenforcementȱactionsȱinȱeitherȱȈdistrictȱcourtȱ[or]ȱ ŗŘ ŗȱ IIȱ
Řȱ Theȱappellantsȱdoȱnotȱcontestȱthatȱconclusion.ȱȱTheyȱimplicitlyȱ
řȱ acknowledgeȱthatȱanȱSECȱadministrativeȱproceeding,ȱonceȱinitiated,ȱisȱtheȱ
4ȱ exclusiveȱinitialȱforumȱforȱclaimsȱȈrequiringȱtheȱdevelopmentȱofȱaȱfactualȱrecord,ȱ
śȱ theȱexerciseȱofȱagencyȱdiscretion,ȱorȱtheȱapplicationȱofȱaȱstatuteȱtoȱparticularȱ
Ŝȱ facts.ȈȱȱAppellantsȇȱBr.ȱatȱŮ.ȱȱTheyȱargue,ȱhowever,ȱthatȱtheirȱAppointmentsȱ
7ȱ Clauseȱchallengeȱisȱaȱdistinctȱtypeȱofȱclaim:ȱȈaȱthresholdȱconstitutionalȱchallengeȱ
8ȱ toȱagencyȱpractice.ȈȱȱId.ȱatȱ12.ȱȱTheyȱassertȱthatȱthisȱtypeȱofȱclaimȱsatisfiesȱallȱthreeȱ
9ȱ ofȱtheȱThunderȱBasinȱfactorsȱandȱsoȱfallsȱoutsideȱtheȱexclusiveȱpurviewȱofȱtheȱ
ŗŖȱ SECȇsȱadministrativeȱreviewȱscheme.ȱ
ŗŗȱ TheȱdistrictȱcourtȱheldȱthatȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱ
ŗŘȱ failedȱtoȱsatisfyȱatȱleastȱtwoȱofȱtheȱThunderȱBasinȱfactors:ȱȱItȱwouldȱbeȱsubjectȱtoȱ
ŗřȱ meaningfulȱjudicialȱreviewȱwithinȱtheȱSECȇsȱadministrativeȱscheme,ȱandȱitȱwasȱ
ŗ4ȱ notȱȈwhollyȱcollateralȈȱtoȱtheȱscheme.ȱȱTilton,ȱ2015ȱWLȱŮ006165,ȱatȱ*ŮȬ12,ȱ2015ȱU.S.ȱ
administrativeȱproceedings.ȈȱȱHill,ȱŗŗ4ȱF.ȱSupp.ȱřdȱatȱŗřŖŜ.ȱȱWeȱdisagree.ȱȱCongressȇsȱ decisionȱtoȱvestȱtheȱSECȱwithȱaȱchoiceȱbetweenȱforumsȱdoesȱnotȱimplyȱthatȱtheȱchosenȱ forumȱshouldȱnotȱbeȱexclusiveȱofȱtheȱother.ȱȱToȱtheȱcontraryȱ—ȱwithoutȱsuchȱexclusivity,ȱ theȱSECȇsȱstatutoryȱpowerȱtoȱchooseȱwouldȱbeȱillusory.ȱȱSeeȱJarkesy,ȱ8ŖřȱF.řdȱatȱŗ7ȱ (ȈCongressȱgrantedȱtheȱchoiceȱofȱforumȱtoȱtheȱCommission,ȱandȱthatȱauthorityȱcouldȱbeȱ forȱnaughtȱifȱrespondentsȱ.ȱ.ȱ.ȱcouldȱcountermandȱtheȱCommissionȇsȱchoiceȱbyȱfilingȱaȱ courtȱaction.Ȉ).ȱ
ŗř ŗȱ Dist.ȱLEXISȱŲ5015,ȱatȱ*ųȬ3Ů.ȱȱTheȱdistrictȱcourtȱalsoȱsuggested,ȱbutȱdidȱnotȱdecide,ȱ
Řȱ thatȱtheȱAppointmentsȱClauseȱclaimȱfailedȱtoȱsatisfyȱtheȱremainingȱThunderȱBasinȱ
řȱ factorȱbecauseȱitȱdidȱnotȱfallȱoutsideȱtheȱSECȇsȱexpertise.ȱȱSeeȱid.ȱatȱ2015ȱWLȱ
4ȱ Ů006165,ȱatȱ*12Ȭ13,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*3ŮȬ36.ȱȱDespiteȱleavingȱaȱ
śȱ decisionȱasȱtoȱthatȱfactorȱopen,ȱtheȱcourtȱconcludedȱthatȱCongressȱintendedȱtheȱ
Ŝȱ SECȇsȱadministrativeȱreviewȱschemeȱtoȱencompassȱtheȱappellantsȇȱAppointmentsȱ
7ȱ Clauseȱclaim,ȱtoȱtheȱexclusionȱofȱfederalȱdistrictȱcourtȱjurisdiction.ȱȱ
8ȱ Weȱagreeȱwithȱthatȱconclusion.ȱȱTheȱappellantsȇȱAppointmentsȱClauseȱ
9ȱ claimȱwillȱbeȱsubjectȱtoȱmeaningfulȱjudicialȱreviewȱthroughȱadministrativeȱ
ŗŖȱ channels,ȱaȱfactȱthatȱweighsȱstronglyȱagainstȱdistrictȱcourtȱjurisdiction.ȱȱSeeȱBebo,ȱ
ŗŗȱ űųųȱF.3dȱatȱűűŮȬű5ȱ(characterizingȱtheȱavailabilityȱofȱmeaningfulȱjudicialȱreviewȱasȱ
ŗŘȱ theȱȈmostȱimportantȈȱThunderȱBasinȱfactor).ȱȱȱAndȱalthoughȱtheȱotherȱtwoȱThunderȱ
ŗřȱ Basinȱfactorsȱpresentȱcloserȱquestionsȱinȱthisȱcase,ȱtheyȱdoȱnotȱpersuasivelyȱ
ŗ4ȱ demonstrateȱthatȱtheȱAppointmentsȱClauseȱclaimȱfallsȱoutsideȱtheȱscopeȱofȱtheȱ
ŗśȱ SECȇsȱoverarchingȱscheme.ȱ
ŗŜȱ A.ȱ TheȱAvailabilityȱofȱMeaningfulȱJudicialȱReviewȱ
ŗ7ȱ TurningȱinȱmoreȱdetailȱtoȱtheȱapplicationȱofȱtheȱThunderȱBasinȱfactors,ȱweȱ
ŗ8ȱ firstȱconsiderȱwhetherȱtheȱSECȇsȱadministrativeȱschemeȱassuresȱthatȱtheȱ
ŗ4 ŗȱ appellantsȱhaveȱanȱopportunityȱforȱmeaningfulȱjudicialȱreviewȱofȱtheirȱ
Řȱ AppointmentsȱClauseȱclaim.ȱȱTheȱappellantsȱdoȱnotȱdisputeȱthatȱtheȱschemeȱ
řȱ offersȱsomeȱjudicialȱreview:ȱanȱappealȱtoȱaȱfederalȱcircuitȱcourtȱfromȱanȱadverseȱ
4ȱ rulingȱbyȱtheȱCommission.ȱȱTheyȱargue,ȱhowever,ȱthatȱsuchȱreviewȱwouldȱnotȱbeȱ
śȱ ȈmeaningfulȈȱbecauseȱitȱcouldȱnotȱprovideȱanȱadequateȱremedyȱforȱtheȱSECȇsȱ
Ŝȱ allegedȱviolationȱofȱtheȱAppointmentsȱClause.ȱȱThatȱisȱso,ȱinȱtheȱappellantsȇȱview,ȱ
7ȱ becauseȱtheirȱexposureȱtoȱtheȱongoingȱproceedingȱ—ȱasȱdistinctȱfromȱanyȱadverseȱ
8ȱ rulingȱthatȱmightȱresultȱ—ȱwouldȱitselfȱconstituteȱaȱgraveȱconstitutionalȱinjuryȱ
9ȱ thatȱcouldȱnotȱbeȱredressedȱafterȱtheȱfact.ȱȱAsȱprecedentialȱsupportȱforȱtheirȱ
ŗŖȱ position,ȱtheȱappellantsȱciteȱtheȱSupremeȱCourtȇsȱdecisionȱinȱFreeȱEnterpriseȱandȱ
ŗŗȱ ourȱdecadesȬoldȱdecisionȱinȱToucheȱRossȱ&ȱCo.ȱv.ȱSEC,ȱ60ųȱF.2dȱ5ű0ȱ(2dȱCir.ȱ1ųűų).ȱ
ŗŘȱ Theȱappellantsȇȱargumentȱisȱnotȱwithoutȱforce,ȱasȱdemonstratedȱbyȱitsȱ
ŗřȱ successȱinȱseveralȱdistrictȱcourts.ȱȱSeeȱHill,ȱ2015ȱWLȱŮ30ű0ŲŲ,ȱatȱ*6ȬŲ,ȱ2015ȱU.S.ȱ
ŗ4ȱ Dist.ȱLEXISȱűŮŲ22,ȱatȱ*1űȬ1ų;ȱDuka,ȱ103ȱF.ȱSupp.ȱ3dȱ3Ų2,ȱ3ų0Ȭų1.ȱȱUltimately,ȱ
ŗśȱ however,ȱweȱareȱnotȱconvinced.ȱȱInȱourȱview,ȱtheȱappellantsȇȱargumentȱ
ŗŜȱ misconstruesȱbothȱFreeȱEnterpriseȱandȱToucheȱRossȱandȱisȱatȱoddsȱwithȱtheȱ
ŗ7ȱ establishedȱapproachȱtoȱanalogousȱjurisdictionalȱdisputesȱinȱfederalȱcourts.ȱ
ŗś ŗȱ i. FreeȱEnterpriseȱ
Řȱ FreeȱEnterpriseȱdealtȱwithȱtheȱPublicȱCompanyȱAccountingȱOversightȱBoardȱ
řȱ (theȱȈPCAOBȈ),ȱanȱentityȱcreatedȱunderȱtheȱSarbanesȬOxleyȱActȱofȱ2002,ȱPub.ȱL.ȱ
4ȱ No.ȱ10űȬ20Ů,ȱ116ȱStat.ȱűŮ5,ȱtoȱsuperviseȱtheȱpracticesȱofȱaccountingȱfirms.ȱȱTheȱ
śȱ PCAOBȇsȱfiveȱmembersȱwereȱtoȱbeȱappointedȱbyȱtheȱSEC,ȱandȱsomeȱ—ȱbutȱnotȱ
Ŝȱ allȱ—ȱofȱtheȱPCAOBȇsȱregulatoryȱactionsȱrequiredȱSECȱapprovalȱinȱtheȱformȱofȱaȱ
7ȱ finalȱCommissionȱorder.ȱȱTheȱSarbanesȬOxleyȱAct,ȱlikeȱtheȱInvestmentȱAdvisersȱ
8ȱ Actȱbeforeȱit,ȱpermittedȱlosingȱpartiesȱtoȱappealȱfromȱanȱadverseȱfinalȱorderȱtoȱaȱ
9ȱ federalȱcourtȱofȱappeals.ȱȱTheȱstatuteȱmadeȱnoȱprovision,ȱhowever,ȱforȱfederalȱ
ŗŖȱ reviewȱofȱBoardȱactionsȱthatȱdidȱnotȱrequireȱSECȱapproval.ȱȱSeeȱFreeȱEnterprise,ȱ
ŗŗȱ 561ȱU.S.ȱatȱŮŲųȬų0.ȱ
ŗŘȱ InȱtheȱFreeȱEnterpriseȱcase,ȱtheȱPCAOBȱhad,ȱinȱtheȱcourseȱofȱitsȱsupervisoryȱ
ŗřȱ work,ȱȈinspectedȱ[aȱparticularȱaccounting]ȱfirm,ȱreleasedȱaȱreportȱcriticalȱofȱitsȱ
ŗ4ȱ auditingȱprocedures,ȱandȱ[begun]ȱaȱformalȱinvestigation.ȈȱȱId.ȱatȱŮŲű.ȱȱThoseȱ
ŗśȱ actionsȱwereȱnotȱsubjectȱtoȱreviewȱbyȱtheȱSECȱorȱapprovalȱbyȱfinalȱCommissionȱ
ŗŜȱ order,ȱandȱsoȱdidȱnotȱgiveȱriseȱtoȱanȱadministrativeȱrouteȱtoȱfederalȱreview.ȱȱId.ȱatȱ
ŗ7ȱ ŮŲųȬų0.ȱȱTheȱaccountingȱfirmȱthenȱfiledȱaȱlawsuitȱinȱfederalȱdistrictȱcourtȱthatȱ
ŗ8ȱ soughtȱtoȱvoidȱtheȱPCAOBȇsȱactionsȱonȱArticleȱIIȱgrounds.ȱȱTheȱfirmȱargued,ȱasȱ
ŗŜ ŗȱ theȱappellantsȱdoȱhere,ȱthatȱtheȱSECȱhadȱviolatedȱtheȱAppointmentsȱClauseȱwhenȱ
Řȱ itȱselectedȱtheȱmembersȱofȱtheȱPCAOB,ȱrenderingȱtheirȱappointmentsȱ
řȱ constitutionallyȱinfirm.ȱȱId.ȱatȱŮŲűȬŲŲ.ȱ
4ȱ TheȱSupremeȱCourtȱheldȱthatȱtheȱdistrictȱcourtȱcouldȱexerciseȱjurisdictionȱ
śȱ overȱtheȱaccountingȱfirmȇsȱlawsuit,ȱdespiteȱtheȱavailabilityȱofȱadministrativeȱ
Ŝȱ reviewȱregardingȱsomeȱotherȱPCAOBȱactions.ȱȱId.ȱatȱŮų0Ȭų1.ȱȱTheȱCourtȱreasoned,ȱ
7ȱ inȱpart,ȱthatȱtheȱadministrativeȱreviewȱschemeȱfailedȱtoȱmakeȱanyȱformȱofȱjudicialȱ
8ȱ reviewȱmeaningfullyȱaccessibleȱtoȱtheȱfirm.ȱȱBecauseȱtheȱPCAOBȇsȱregulatoryȱ
9ȱ actionsȱhadȱnotȱproducedȱaȱreviewableȱCommissionȱorder,ȱtheȱaccountingȱfirmȱ
ŗŖȱ couldȱhaveȱraisedȱitsȱconstitutionalȱobjectionȱinȱfederalȱcourtȱthroughȱ
ŗŗȱ administrativeȱchannelsȱonlyȱbyȱmanufacturingȱaȱnew,ȱtangentialȱdisputeȱthatȱ
ŗŘȱ wouldȱrequireȱaȱCommissionȱorder,ȱandȱthenȱusingȱthatȱdisputeȱasȱaȱvehicleȱforȱ
ŗřȱ itsȱArticleȱIIȱclaims.ȱȱTheȱCourtȱdeemedȱthatȱcircuitousȱoptionȱinadequate,ȱandȱsoȱ
ŗ4ȱ concludedȱthatȱmeaningfulȱjudicialȱreviewȱwasȱnotȱotherwiseȱavailableȱtoȱtheȱ
ŗśȱ accountingȱfirm.ȱȱId.ȱatȱŮų0.ȱ
ŗŜȱ TheȱappellantsȱreadȱFreeȱEnterpriseȱtoȱsuggestȱthatȱjudicialȱreviewȱofȱanȱ
ŗ7ȱ ArticleȱIIȱchallengeȱtoȱanȱadministrativeȱtribunalȱisȱnotȱmeaningfulȱifȱconductedȱ
ŗ8ȱ afterȱtheȱtribunalȇsȱproceedingȱconcludes,ȱbecauseȱofȱtheȱinherentȱremedialȱ
ŗ7 ŗȱ limitationsȱofȱpostȬproceedingȱreview.ȱȱSeeȱAppellantsȇȱBr.ȱatȱ13,ȱ1űȬ1Ų.ȱȱWeȱ
Řȱ disagree.ȱȱTheȱFreeȱEnterpriseȱCourtȇsȱanalysisȱturnedȱonȱtheȱaccessibilityȱofȱpostȬ
řȱ proceedingȱreviewȱbyȱaȱfederalȱcourtȱofȱappealsȱ—ȱnotȱonȱwhetherȱsuchȱreview,ȱ
4ȱ ifȱaccessible,ȱcouldȱadequatelyȱremedyȱtheȱPCAOBȇsȱallegedȱviolationȱofȱArticleȱ
śȱ II.ȱȱFreeȱEnterpriseȱthereforeȱlendsȱnoȱsupportȱtoȱtheȱappellantsȇȱcharacterizationȱofȱ
Ŝȱ theirȱprospectiveȱconstitutionalȱinjuryȱasȱirremediableȱafterȱtheȱconclusionȱofȱ
7ȱ theirȱadministrativeȱproceeding.ȱ
8ȱ ii. ToucheȱRossȱ
9ȱ TheȱappellantsȇȱrelianceȱonȱToucheȱRossȱisȱsimilarlyȱunavailing.ȱȱThere,ȱtheȱ
ŗŖȱ SECȱtookȱstepsȱtoȱinstituteȱanȱadministrativeȱproceedingȱagainstȱanȱaccountingȱ
ŗŗȱ firmȱandȱseveralȱofȱitsȱpartnersȱ(collectively,ȱȈToucheȱRossȈ)ȱunderȱRuleȱ2(e)ȱofȱ
ŗŘȱ theȱCommissionȇsȱRulesȱofȱPractice,ȱwhichȱrelatedȱtoȱtheȱsuspensionȱandȱ
ŗřȱ disbarmentȱofȱpersonsȱpracticingȱbeforeȱtheȱCommissioner.ȱȱToucheȱRossȱ
ŗ4ȱ immediatelyȱfiledȱaȱlawsuitȱinȱfederalȱcourtȱseekingȱtoȱenjoinȱtheȱproceedingȱonȱ
ŗśȱ theȱgroundȱthatȱRuleȱ2(e)ȱwasȱnotȱauthorizedȱbyȱstatute.ȱȱȱ
ŗŜȱ Theȱdistrictȱcourtȱdeclinedȱtoȱexerciseȱjurisdiction.ȱȱItȱreasoned,ȱinȱpart,ȱthatȱ
ŗ7ȱ theȱplannedȱadministrativeȱproceedingȱwouldȱnotȱirreparablyȱharmȱToucheȱRoss,ȱ
ŗ8ȱ whichȱmeantȱthatȱToucheȱRossȱwasȱrequiredȱtoȱexhaustȱtheȱadministrativeȱ
ŗ8 ŗȱ reviewȱprocessȱbeforeȱraisingȱitsȱclaimsȱinȱfederalȱcourt.ȱȱSeeȱTouche,ȱRossȱ&ȱCo.ȱv.ȱ
Řȱ SEC,ȱNo.ȱű6ȬCVȬŮŮŲų,ȱ1ųűŲȱWLȱ10ŲŮ,ȱatȱ*ŮȬ5,ȱűȬų,ȱ1ųűŲȱU.S.ȱDist.ȱLEXISȱ1űųűŮ,ȱ*ųȬ
řȱ 12,ȱ1ŲȬ1ų,ȱ23ȱ(S.D.N.Y.ȱApr.ȱ2Ů,ȱ1ųűŲ),ȱaffȇdȱsubȱnom.ȱToucheȱRossȱ&ȱCo.ȱv.ȱSEC,ȱ60ųȱ
4ȱ F.2dȱ5ű0ȱ(2dȱCir.ȱ1ųűų).ȱ
śȱ Onȱappeal,ȱthisȱCourtȱrecognizedȱdistrictȱcourtȱjurisdictionȱoverȱToucheȱ
Ŝȱ Rossȇsȱlawsuit.ȱȱTheȱpanelȱacknowledgedȱthatȱfederalȱchallengesȱtoȱ
7ȱ administrativeȱproceedingsȱatȱȈintermediateȱstagesȈȱareȱgenerallyȱdisfavored,ȱ
8ȱ particularlyȱwhereȱ—ȱasȱinȱtheȱcaseȱbeforeȱitȱ—ȱtheȱagencyȱhadȱnotȱactedȱȈplainlyȱ
9ȱ beyondȱitsȱjurisdiction.ȈȱȱToucheȱRoss,ȱ60ųȱF.2dȱatȱ5ű6.ȱȱNonetheless,ȱtheȱCourtȱ
ŗŖȱ permittedȱToucheȱRossȇsȱlawsuitȱtoȱproceedȱonȱtheȱgroundȱthatȱitsȱconstitutionalȱ
ŗŗȱ claimȱwouldȱnotȱbenefitȱfromȱtheȱSECȇsȱȈexpertise,ȈȱȈdiscretionȈȱorȱfactfinding,ȱ
ŗŘȱ andȱwasȱthusȱalreadyȱripeȱforȱfederalȱadjudication.ȱȱId.ȱatȱ5űű.ȱ
ŗřȱ TheȱCourtȇsȱdecisionȱdidȱnotȱsuggestȱthatȱaȱfederalȱcourtȱwouldȱbeȱunableȱ
ŗ4ȱ toȱvindicateȱToucheȱRossȇsȱchallengeȱtoȱRuleȱ2(e)ȱafterȱtheȱSECȇsȱproceedingȱ
ŗśȱ concluded.4ȱȱItȱheldȱonlyȱthatȱthereȱwasȱnoȱcompellingȱreasonȱforȱToucheȱRossȱtoȱ
ŗŜȱ waitȱforȱpostȬproceedingȱreviewȱbecauseȱtheȱadministrativeȱtribunalȱwouldȱnotȱ ȱIndeed,ȱinȱaȱconcurringȱopinion,ȱtwoȱmembersȱofȱtheȱpanelȱexpressedȱtheirȱ 4
confidenceȱinȱtheȱcapacityȱofȱpostȬproceedingȱjudicialȱreviewȱtoȱȈcorrectȱtheȱoccasionalȱ excessesȱandȱerrorsȱthatȱareȱanȱinevitableȱpartȱofȱtheȱadministrativeȱprocess.ȈȱȱToucheȱ Ross,ȱŜŖ9ȱF.Řdȱatȱś8řȱ(Kaufman,ȱC.J.,ȱconcurring).ȱ
ŗ9 ŗȱ bringȱitsȱexpertiseȱtoȱbearȱinȱaȱwayȱthatȱwouldȱaidȱaȱfederalȱcourtȇsȱeventualȱ
Řȱ adjudication.ȱȱThatȱpropositionȱdoesȱnotȱsupportȱtheȱappellantsȇȱcontentionȱhereȱ
řȱ thatȱpostȬproceedingȱjudicialȱreviewȱofȱtheirȱAppointmentsȱClauseȱchallengeȱwillȱ
4ȱ notȱbeȱmeaningful.ȱȱRather,ȱToucheȱRossȱresonatesȱwithȱaȱdifferentȱThunderȱBasinȱ
śȱ factor:ȱȱwhetherȱaȱclaimȱfallsȱoutsideȱanȱagencyȇsȱexpertise.ȱȱAndȱitsȱreasoningȱonȱ
Ŝȱ thatȱissueȱisȱnoȱlongerȱconsideredȱsound,ȱasȱweȱexplainȱbelow.ȱ
7ȱ iii. ConflictȱwithȱEstablishedȱPracticeȱRegardingȱAnalogousȱ 8ȱ ChallengesȱtoȱaȱTribunalȇsȱConstitutionalȱLegitimacyȱ 9ȱ ȱ ŗŖȱ TheȱappellantsȇȱargumentȱthatȱpostȬproceedingȱjudicialȱreviewȱofȱtheirȱ
ŗŗȱ AppointmentsȱClauseȱclaimȱwillȱbeȱmeaninglessȱisȱnotȱmerelyȱunsupportedȱbyȱ
ŗŘȱ FreeȱEnterpriseȱandȱToucheȱRoss;ȱitȱisȱalsoȱatȱoddsȱwithȱestablishedȱpracticeȱinȱ
ŗřȱ federalȱcourtȱregardingȱanalogousȱchallengesȱtoȱaȱtribunalȇsȱconstitutionalȱ
ŗ4ȱ legitimacy.ȱȱAsȱtheȱdistrictȱcourtȱexplained,ȱlitigantsȱwhoȱunsuccessfullyȱ
ŗśȱ challengeȱtheȱauthorityȱofȱaȱpresidingȱjudgeȱorȱjuryȱtoȱdecideȱaȱcaseȱoftenȱmustȱ
ŗŜȱ waitȱtoȱappealȱtheȱissueȱuntilȱafterȱtheȱcourtȱrendersȱaȱfinalȱjudgment.ȱȱSee,ȱe.g.,ȱ
ŗ7ȱ Germainȱv.ȱConnecticutȱNatȇlȱBank,ȱų30ȱF.2dȱ103Ų,ȱ10Ů0ȱ(2dȱCir.ȱ1ųų1)ȱ(concludingȱ
ŗ8ȱ thatȱaȱdefendantȱwhoȱunsuccessfullyȱchallengedȱtheȱplaintiffȇsȱrightȱtoȱjuryȱtrialȱ
ŗ9ȱ mustȱawaitȱtheȱjuryȇsȱverdictȱbeforeȱappealing);ȱDȇIppolitoȱv.ȱAm.ȱOilȱCo.,ȱŮ01ȱF.2dȱ
ŘŖȱ ű6Ů,ȱű6ŮȬ65ȱ(2dȱCir.ȱ1ų6Ų)ȱ(perȱcuriam)ȱ(decidingȱthatȱaȱdefendantȱwhoȱ
ŘŖ ŗȱ unsuccessfullyȱchallengedȱtheȱtransferȱofȱhisȱcaseȱtoȱanotherȱdistrictȱmustȱawaitȱ
Řȱ theȱotherȱdistrictȱcourtȇsȱȈfinalȱjudgmentȈȱbeforeȱappealing);ȱseeȱalsoȱInȱreȱalȬ
řȱ Nashiri,ȱűų1ȱF.3dȱű1,ȱű5,ȱŲ0ȱ(D.C.ȱCir.ȱ2015)ȱ(concluding,ȱinȱdenyingȱaȱpetitionȱforȱ
4ȱ writȱofȱmandamus,ȱthatȱaȱdefendantȱwhoȱunsuccessfullyȱraisedȱanȱAppointmentsȱ
śȱ ClauseȱchallengeȱtoȱtwoȱofȱtheȱUnitedȱStatesȱCourtȱofȱMilitaryȱCommissionȱ
Ŝȱ Reviewȇsȱpresidingȱjudgesȱmustȱawaitȱtheȱjudgesȇȱrulingȱbeforeȱappealingȱinȱ
7ȱ federalȱcourt).ȱȱLikeȱtheȱappellantsȱhere,ȱaȱlitigantȱinȱthisȱkindȱofȱcaseȱmustȱ
8ȱ expendȱfinancialȱandȱemotionalȱresourcesȱtoȱcompleteȱaȱproceedingȱthatȱmayȱ
9ȱ ultimatelyȱproveȱconstitutionallyȱinfirm.śȱȱSubsequentȱjudicialȱreviewȱcannotȱ
ŗŖȱ restoreȱthoseȱresources,ȱbutȱitȱcanȱvacateȱtheȱresultingȱjudgmentȱandȱremandȱforȱ
ŗŗȱ aȱnewȱproceeding.ȱȱThatȱpostȬproceedingȱrelief,ȱalthoughȱimperfect,ȱsufficesȱtoȱ
ŗŘȱ vindicateȱtheȱlitigantȇsȱconstitutionalȱclaim.ȱȱSeeȱGermain,ȱų30ȱF.2dȱatȱ10Ů0ȱ
ŗřȱ (explainingȱthatȱifȱaȱjuryȱtrialȱwereȱinȱfactȱimproper,ȱanȱappellateȱcourtȱcouldȱ
ŗ4ȱ Ȉremandȱforȱaȱnonjuryȱtrial,ȱthusȱvindicatingȱtheȱ[objectingȱdefendantȇs]ȱrightȈ);ȱ
ŗśȱ seeȱalsoȱInȱreȱalȬNashiri,ȱűų1ȱF.3dȱatȱŲ0ȱ(ȈVacaturȱ[premisedȱonȱtheȱdefendantȇsȱ
ŗŜȱ AppointmentȱClauseȱclaim],ȱevenȱatȱtheȱappealȬfromȬfinalȬjudgmentȱstage,ȱ
ȱȱȱCf.ȱLearnedȱHand,ȱTheȱDeficienciesȱofȱTrialsȱToȱReachȱtheȱHeartȱofȱtheȱMatter,ȱ ś
řȱAssociationȱofȱtheȱBarȱofȱtheȱCityȱofȱNewȱYork,ȱLecturesȱonȱLegalȱTopicsȱ89,ȱŗŖśȱ(ŗ9ŘŜ)ȱ (musingȱthatȱbecomingȱaȱpartyȱtoȱaȱlawsuitȱshouldȱbeȱȈdread[ed]ȱ.ȱ.ȱ.ȱbeyondȱalmostȱ anythingȱelseȱshortȱofȱsicknessȱandȱdeathȈ).ȱ
Řŗ ŗȱ wouldȱfullyȱvindicateȱ[theȱdefendantȇs]ȱrightsȱandȱtheȱPresidentȇsȱandȱtheȱ
Řȱ Senateȇsȱconstitutionalȱpowers.Ȉȱ(internalȱquotationȱmarksȱandȱalterationsȱ
řȱ omitted)).ȱȱTheȱlitigantȇsȱfinancialȱandȱemotionalȱcostsȱinȱlitigatingȱtheȱinitialȱ
4ȱ proceedingȱareȱsimplyȱtheȱpriceȱofȱparticipatingȱinȱtheȱAmericanȱlegalȱsystem,ȱ
śȱ andȱnotȱanȱirreparableȱinjuryȱthatȱnecessitatesȱinterlocutoryȱreviewȱofȱtheȱinitialȱ
Ŝȱ courtȇsȱjurisdiction.ȱ
7ȱ TheȱSupremeȱCourtȱappliedȱthisȱprincipleȱtoȱfactsȱsimilarȱtoȱthoseȱ
8ȱ presentedȱtoȱusȱhereȱinȱFTCȱv.ȱStandardȱOilȱCo.ȱofȱCalifornia,ȱŮŮųȱU.S.ȱ232ȱ(1ųŲ0).ȱȱ
9ȱ There,ȱanȱoilȱcompanyȱbroughtȱsuitȱinȱfederalȱdistrictȱcourtȱtoȱenjoinȱanȱongoingȱ
ŗŖȱ administrativeȱproceedingȱconductedȱbyȱtheȱFederalȱTradeȱCommissionȱ(ȈFTCȈ),ȱ
ŗŗȱ contendingȱthatȱtheȱproceedingȱasȱaȱwholeȱwasȱunlawfulȱbecauseȱtheȱFTCȱhadȱ
ŗŘȱ initiatedȱitȱwithoutȱtheȱrequisiteȱevidentiaryȱbasis.ȱȱId.ȱatȱ235.ȱȱAsȱaȱgeneralȱ
ŗřȱ matter,ȱaȱrespondentȱinȱthisȱtypeȱofȱproceedingȱmustȱexhaustȱitsȱadministrativeȱ
ŗ4ȱ remediesȱbeforeȱfilingȱaȱrelatedȱactionȱinȱfederalȱcourt,ȱunlessȱtheȱrespondentȱ
ŗśȱ wouldȱsufferȱirreparableȱinjuryȱfromȱtheȱdelay.ȱȱSeeȱRenegotiationȱBd.ȱv.ȱ
ŗŜȱ BannercraftȱClothingȱCo.,ȱŮ15ȱU.S.ȱ1,ȱ2Ůȱ(1ųűŮ).ȱȱTheȱoilȱcompanyȱarguedȱthatȱitȱhadȱ
ŗ7ȱ exhaustedȱallȱrelevantȱremediesȱbeforeȱfilingȱitsȱfederalȱlawsuit.ȱȱStandardȱOil,ȱŮŮųȱ
ŗ8ȱ U.S.ȱatȱ2Ů3.ȱȱInȱtheȱalternative,ȱhowever,ȱtheȱcompanyȱcontendedȱthatȱanyȱfailureȱ
ŘŘ ŗȱ toȱexhaustȱshouldȱbeȱexcusedȱbecauseȱtheȱcompanyȱwouldȱsufferȱirreparableȱ
Řȱ injuryȱinȱtheȱformȱofȱȈexpenseȱandȱdisruptionȈȱifȱitȱwereȱcompelledȱtoȱcompleteȱ
řȱ theȱadministrativeȱproceedingȱbeforeȱreachingȱfederalȱcourt.ȱȱId.ȱatȱ2ŮŮ.ȱȱThatȱ
4ȱ argumentȱcloselyȱresemblesȱtheȱappellantsȇȱclaimȱhereȱthatȱpostȬproceedingȱ
śȱ judicialȱreviewȱwillȱbeȱpowerlessȱtoȱremedyȱtheȱinjuryȱtheyȱwillȱsufferȱbyȱ
Ŝȱ enduringȱtheȱSECȇsȱadministrativeȱadjudication.ȱ
7ȱ TheȱSupremeȱCourtȱconcludedȱthatȱaȱfederalȱcourtȱwouldȱbeȱableȱtoȱ
8ȱ meaningfullyȱreviewȱtheȱoilȱcompanyȇsȱclaimȱafterȱtheȱadministrativeȱproceedingȱ
9ȱ ended,ȱandȱthereforeȱorderedȱtheȱcompanyȇsȱlawsuitȱdismissedȱonȱjurisdictionalȱ
ŗŖȱ grounds.ȱȱTheȱCourtȱacknowledgedȱthatȱtheȱcompanyȱwouldȱendureȱ
ŗŗȱ ȈsubstantialȈȱexpenseȱandȱdisruptionȱbeforeȱtheȱadministrativeȱproceedingȱ
ŗŘȱ concluded.ȱȱId.ȱȱButȱitȱdeemedȱthatȱhardshipȱtoȱbeȱȈpartȱofȱtheȱsocialȱburdenȱofȱ
ŗřȱ livingȱunderȱgovernment,Ȉȱratherȱthanȱaȱformȱofȱirreparableȱinjuryȱjustifyingȱ
ŗ4ȱ immediateȱjudicialȱreview.ȱȱId.ȱatȱ2ŮŮȬŮ5.ȱȱAsȱtheȱD.C.ȱCircuitȱsubsequentlyȱ
ŗśȱ explained,ȱwhereȱȈtheȱȇinjuryȇȱinflictedȱonȱtheȱpartyȱseekingȱreviewȱisȱtheȱburdenȱ
ŗŜȱ ofȱgoingȱthroughȱanȱagencyȱproceeding,ȈȱtheȱSupremeȱCourtȇsȱdecisionȱinȱ
ŗ7ȱ StandardȱOilȱȈteachesȱthatȱtheȱpartyȱmustȱpatientlyȱawaitȱtheȱdenouementȱofȱ
Řř ŗȱ proceedingsȱwithinȱtheȱArticleȱIIȱbranch.ȈȱȱUSAAȱFed.ȱSav.ȱBankȱv.ȱMcLaughlin,ȱ
Řȱ ŲŮųȱF.2dȱ1505,ȱ1510ȱ(D.C.ȱCir.ȱ1ųŲŲ).ȱ
řȱ Inȱotherȱdecisions,ȱtheȱSupremeȱCourtȱhasȱconcludedȱthatȱpostȬproceedingȱ
4ȱ judicialȱreviewȱwouldȱnotȱbeȱmeaningfulȱbecauseȱtheȱproceedingȱitselfȱposedȱaȱ
śȱ riskȱofȱsomeȱadditionalȱandȱirremediableȱharmȱbeyondȱtheȱburdensȱassociatedȱ
Ŝȱ withȱtheȱdisputeȱresolutionȱprocess.ȱȱSee,ȱe.g.,ȱMcNaryȱv.ȱHaitianȱRefugeeȱCtr.,ȱInc.,ȱ
7ȱ ŮųŲȱU.S.ȱŮűų,ȱŮų6Ȭųű,ȱŮųųȱ(1ųų1)ȱ(permittingȱaȱclassȱofȱundocumentedȱaliensȱtoȱ
8ȱ raiseȱaȱdueȬprocessȱchallengeȱtoȱINSȱproceedingsȱinȱdistrictȱcourt,ȱratherȱthanȱ
9ȱ pursueȱeventualȱreviewȱinȱaȱfederalȱcourtȱofȱappealsȱthroughȱadministrativeȱ
ŗŖȱ channels,ȱpartlyȱbecauseȱmostȱofȱtheȱaliensȱcouldȱȈensureȱthemselvesȱreviewȱinȱ
ŗŗȱ courtsȱofȱappealsȱonlyȱifȱtheyȱvoluntarilyȱsurrender[ed]ȱthemselvesȱforȱ
ŗŘȱ deportation,ȈȱaȱȈpriceȱ.ȱ.ȱ.ȱtantamountȱtoȱaȱcompleteȱdenialȱofȱjudicialȱreviewȱforȱ
ŗřȱ mostȱundocumentedȱaliensȈ).ȱȱButȱtheȱappellantsȱhaveȱidentifiedȱnoȱsuchȱ
ŗ4ȱ additional,ȱirremediableȱharmȱhere.ȱȱTheȱonlyȱprospectiveȱinjuryȱthatȱtheyȱ
ŗśȱ describeȱisȱȈbeingȱsubjectedȱtoȱanȱunconstitutionalȱadjudicativeȱprocedure,Ȉȱwithȱ
ŗŜȱ theȱattendantȱȈembarrassment,ȱexpense,ȱȱ.ȱ.ȱ.ȱordealȱ.ȱ.ȱ.ȱ[and]ȱstateȱofȱanxietyȱandȱ
ŗ7ȱ insecurity.ȈȱȱAppellantsȇȱBr.ȱatȱ1ų,ȱ21ȱ(alterationsȱinȱoriginalȱandȱinternalȱ
ŗ8ȱ quotationȱmarksȱomitted).ȱȱAsȱStandardȱOilȱandȱotherȱdecisionsȱdiscussedȱaboveȱ
Ř4 ŗȱ indicate,ȱtheȱprospectȱofȱsuchȱharmȱaloneȱdoesȱnotȱrenderȱpostȬproceedingȱ
Řȱ judicialȱreviewȱlessȱthanȱmeaningful.ȱȱCf.ȱInȱreȱalȬNashiri,ȱűų1ȱF.3dȱatȱűųȬŲ0ȱ
řȱ (explainingȱthatȱtheȱdefendantȇsȱȈabstractȱconcernȈȱthatȱhisȱpresidingȱjudgesȱ
4ȱ violatedȱȈtheȱseparationȱofȱpowersȈȱbecauseȱtheyȱhadȱbeenȱimproperlyȱappointedȱ
śȱ didȱnotȱestablishȱaȱprospectiveȱirreparableȱinjuryȱthatȱjustifiedȱimmediateȱfederalȱ
Ŝȱ interventionȱinȱongoingȱadministrativeȱproceedings).ȱ
7ȱ Weȱthereforeȱconcludeȱthatȱtheȱappellantsȱwillȱhaveȱaccessȱtoȱmeaningfulȱ
8ȱ judicialȱreviewȱofȱtheirȱAppointmentsȱClauseȱclaimȱthroughȱadministrativeȱ
9ȱ channels.ȱȱSeeȱBebo,ȱűųųȱF.3dȱatȱűűŮȱ(concludingȱthatȱaȱrespondentȱinȱanȱongoingȱ
ŗŖȱ SECȱadministrativeȱproceedingȱcouldȱobtainȱmeaningfulȱjudicialȱreviewȱȈ[a]fterȱ
ŗŗȱ theȱpendingȱenforcementȱactionȱhasȱrunȱitsȱcourseȈȱbyȱȈrais[ing]ȱherȱobjections,Ȉȱ
ŗŘȱ includingȱanȱArticleȱIIȱchallengeȱtoȱtheȱpresidingȱALJ,ȱȈinȱaȱcircuitȱcourtȱofȱ
ŗřȱ appealsȱestablishedȱunderȱArticleȱIIIȈ);ȱseeȱalsoȱJarkesy,ȱŲ03ȱF.3dȱatȱ2űȱ(ȈEvenȱ
ŗ4ȱ assumingȱ[theȱrespondent]ȱisȱrightȱthatȱCongressȱhasȱunconstitutionallyȱ
ŗśȱ delegatedȱpowerȱtoȱtheȱSECȱtoȱdecideȱwhetherȱtoȱplaceȱhimȱinȱanȱadministrativeȱ
ŗŜȱ proceedingȱratherȱthanȱinȱaȱcourtȱaction,ȱ[theȱrespondent]ȱhasȱnoȱinherentȱrightȱtoȱ
ŗ7ȱ avoidȱanȱadministrativeȱproceedingȱatȱall.ȱȱThus,ȱhisȱrightsȱcanȱbeȱvindicatedȱbyȱaȱ
Řś ŗȱ reversalȱofȱtheȱCommissionȇsȱfinalȱorderȱifȱtheȱcourtȱofȱappealsȱgrantsȱhisȱpetitionȱ
Řȱ forȱreview.Ȉȱ(internalȱquotationȱmarksȱomitted)).ȱ
řȱ B.ȱ WhollyȱCollateralȱ
4ȱ WeȱnextȱconsiderȱwhetherȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱ
śȱ ȈwhollyȱcollateralȈȱtoȱtheȱSECȇsȱadministrativeȱscheme.ȱȱTheȱSupremeȱCourtȱhasȱ
Ŝȱ notȱexplainedȱpreciselyȱhowȱtoȱmakeȱthisȱdetermination,ȱalthoughȱElginȱsuggestsȱ
7ȱ thatȱaȱclaimȱisȱnotȱwhollyȱcollateralȱifȱitȱservesȱasȱtheȱȈvehicleȱbyȱwhichȈȱaȱpartyȱ
8ȱ seeksȱtoȱprevailȱinȱanȱadministrativeȱproceeding.ȱȱSeeȱ132ȱS.ȱCt.ȱatȱ213ųȬŮ0.ȱȱInȱtheȱ
9ȱ absenceȱofȱmoreȱextensiveȱguidance,ȱlowerȱcourtsȱhaveȱadoptedȱtwoȱcompetingȱ
ŗŖȱ approaches.ȱȱSomeȱdecisionsȱhaveȱsuggestedȱthatȱaȱclaimȱisȱnotȱwhollyȱcollateralȱ
ŗŗȱ toȱanȱadministrativeȱproceedingȱonlyȱifȱitȱisȱsubstantivelyȱintertwinedȱwithȱtheȱ
ŗŘȱ meritsȱdisputeȱthatȱtheȱproceedingȱwasȱcommencedȱtoȱresolve.ȱȱSeeȱHill,ȱ11ŮȱF.ȱ
ŗřȱ Supp.ȱ3dȱatȱ130ųȱ(concludingȱthatȱtheȱrespondentȇsȱArticleȱIIȱchallengeȱwasȱ
ŗ4ȱ ȈwhollyȱcollateralȈȱtoȱtheȱongoingȱadministrativeȱproceedingȱbecauseȱȈ[w]hatȱ
ŗśȱ occursȱatȱtheȱ.ȱ.ȱ.ȱproceedingȱandȱtheȱSECȇsȱconductȱthereȱisȱirrelevantȱtoȈȱtheȱ
ŗŜȱ constitutionalȱchallenge);ȱDuka,ȱ103ȱF.ȱSupp.ȱ3dȱatȱ3ų1ȱ(concludingȱthatȱtheȱ
ŗ7ȱ respondentȇsȱArticleȱIIȱchallengeȱwasȱȈwhollyȱcollateralȈȱtoȱtheȱongoingȱ
ŗ8ȱ administrativeȱproceedingȱbecauseȱtheȱchallengeȱdidȱnotȱȈattackȱanyȱorderȱthatȱ
ŘŜ ŗȱ mayȱbeȱissuedȱ.ȱ.ȱ.ȱrelatingȱtoȱtheȱoutcomeȱofȱtheȱSECȱactionȈȱ(internalȱquotationȱ
Řȱ marksȱomitted)).ȱȱOtherȱdecisionsȱhaveȱsuggestedȱthatȱaȱclaimȱisȱnotȱwhollyȱ
řȱ collateralȱifȱitȱhasȱbeenȱraisedȱinȱresponseȱto,ȱandȱsoȱisȱprocedurallyȱintertwinedȱ
4ȱ with,ȱanȱadministrativeȱproceedingȱ—ȱregardlessȱofȱtheȱclaimȇsȱsubstantiveȱ
śȱ connectionȱtoȱtheȱinitialȱmeritsȱdisputeȱinȱtheȱproceeding.ȱȱSeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ
Ŝȱ 23ȱ(concludingȱthatȱclaimsȱarisingȱȈfromȱactionsȱtheȱCommissionȱtookȱinȱtheȱ
7ȱ courseȱofȱ[itsȱadministrative]ȱschemeȈȱwereȱnotȱȈwhollyȱcollateralȈ);ȱBebo,ȱ2015ȱ
8ȱ WLȱų053Ůų,ȱatȱ*2ȬŮ,ȱ2015ȱU.S.ȱDist.ȱLEXISȱ25660,ȱatȱ*ŮȬ10ȱ(implicitlyȱconcludingȱ
9ȱ thatȱtheȱrespondentȇsȱArticleȱIIȱchallengeȱdidȱnotȱqualifyȱasȱwhollyȱcollateralȱtoȱ
ŗŖȱ theȱongoingȱadministrativeȱproceedingȱbecauseȱitȱwasȱraisedȱthereȱasȱanȱ
ŗŗȱ affirmativeȱdefense).ȱȱSeeȱgenerallyȱBebo,ȱűųųȱF.3dȱatȱűű3ȬűŮȱ(comparingȱtheseȱtwoȱ
ŗŘȱ linesȱofȱdecisions).ȱ
ŗřȱ Theȱdistrictȱcourtȱhereȱadoptedȱtheȱlatterȱapproach.ȱȱItȱbeganȱitsȱanalysisȱbyȱ
ŗ4ȱ notingȱthatȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱsubstantivelyȱ
ŗśȱ Ȉunrelatedȱtoȱtheȱsecuritiesȱviolationsȱunderlyingȱtheȱadministrativeȱproceeding,Ȉȱ
ŗŜȱ suchȱthatȱresolvingȱtheȱchallengeȱȈcannotȱreasonablyȱbeȱcharacterizedȱasȱtheȱ
ŗ7ȱ ȇregularȇȱorȱȇroutineȇȱbusinessȱofȱSECȱadministrativeȱproceedings.ȈȱȱTilton,ȱ2015ȱ
ŗ8ȱ WLȱŮ006165,ȱatȱ*11,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*31Ȭ32ȱ(quoting,ȱwithȱminorȱ
Ř7 ŗȱ alterations,ȱElgin,ȱ132ȱS.ȱCt.ȱatȱ21Ů0).ȱȱNevertheless,ȱtheȱcourtȱdecidedȱthatȱtheȱ
Řȱ claimȱdidȱnotȱqualifyȱasȱȈwhollyȱcollateralȈȱbecauseȱitȱwasȱprocedurallyȱ
řȱ intertwinedȱwithȱtheȱSECȇsȱongoingȱproceeding,ȱwhereȱitȱfunctionedȱasȱanȱ
4ȱ affirmativeȱdefense.ȱȱId.ȱatȱ2015ȱWLȱŮ006165,ȱatȱ*12,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱ
śȱ atȱ*32Ȭ3Ů.ȱ
Ŝȱ AbsentȱfurtherȱguidanceȱfromȱtheȱSupremeȱCourt,ȱweȱareȱinclinedȱtoȱagreeȱ
7ȱ withȱtheȱdistrictȱcourtȇsȱassessment.ȱȱTheȱSECȱchoseȱtoȱenforceȱtheȱInvestmentȱ
8ȱ AdvisersȱActȱagainstȱtheȱappellantsȱbyȱinitiatingȱanȱadministrativeȱproceedingȱ
9ȱ andȱappointingȱanȱALJȱtoȱactȱasȱtheȱhearingȱofficer.ȱȱTheȱappellantsȇȱ
ŗŖȱ AppointmentsȱClauseȱclaimȱaroseȱdirectlyȱfromȱthatȱenforcementȱactionȱandȱ
ŗŗȱ servesȱasȱanȱaffirmativeȱdefenseȱwithinȱtheȱproceeding.ȱȱToȱbeȱsure,ȱtheȱclaimȱ
ŗŘȱ couldȱbeȱnarrowlyȱcategorizedȱasȱcollateralȱtoȱtheȱstatutoryȱmeritsȱofȱtheȱ
ŗřȱ InvestmentȱAdvisersȱActȱchargesȱagainstȱtheȱappellants.ȱȱButȱweȱcannotȱconcludeȱ
ŗ4ȱ thatȱtheȱclaimȱisȱwhollyȱcollateralȱtoȱtheȱSECȇsȱadministrativeȱschemeȱmoreȱ
ŗśȱ broadly.ȱȱAsȱtheȱdistrictȱcourtȱrecognized,ȱitȱisȱȈdifficultȱtoȱseeȱhowȱ[theȱ
ŗŜȱ AppointmentsȱClauseȱclaim]ȱcanȱstillȱbeȱconsideredȱȇcollateralȱtoȱanyȱ
ŗ7ȱ Commissionȱordersȱorȱrulesȱfromȱwhichȱreviewȱmightȱbeȱsought,ȇȱsinceȱtheȱALJȱ
ŗ8ȱ andȱtheȱCommissionȱwill,ȱoneȱwayȱorȱanother,ȱruleȱonȱthoseȱclaimsȱandȱitȱwillȱbeȱ
Ř8 ŗȱ theȱCommissionȇsȱorderȱthatȱ[theȱappellants]ȱwillȱappeal.ȈȱȱTilton,ȱ2015ȱWLȱ
Řȱ Ů006165,ȱatȱ*12,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*32ȱ(citationȱandȱsomeȱinternalȱ
řȱ quotationȱmarksȱomitted)ȱ(quotingȱFreeȱEnterprise,ȱ561ȱU.S.ȱatȱŮų0);ȱseeȱalsoȱJarkesy,ȱ
4ȱ Ų03ȱF.3dȱatȱ23ȱ(reachingȱaȱsimilarȱconclusion).ȱȱPutȱanotherȱway,ȱtheȱ
śȱ AppointmentsȱClauseȱclaim,ȱlikeȱaccompanyingȱdefensesȱtoȱtheȱmeritsȱofȱtheȱ
Ŝȱ InvestmentȱAdvisersȱActȱcharges,ȱisȱaȱȈvehicleȱbyȱwhichȈȱtheȱappellantsȱseekȱtoȱ
7ȱ prevailȱinȱtheȱproceeding.ȱȱElgin,ȱ132ȱS.ȱCt.ȱatȱ213ų.ȱȱTheȱclaimȱidentifiesȱaȱ
8ȱ purportedȱerrorȱinȱtheȱwayȱtheȱCommissionȱhasȱsoughtȱtoȱenforceȱtheȱsecuritiesȱ
9ȱ laws,ȱalbeitȱoneȱthatȱsoundsȱinȱadministrativeȱprocedureȱratherȱthanȱstatutoryȱ
ŗŖȱ construction.ȱ
ŗŗȱ TheȱdissentȱarguesȱthatȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱasȱ
ŗŘȱ collateralȱtoȱtheȱSECȇsȱadministrativeȱschemeȱasȱtheȱaccountingȱfirmȇsȱ
ŗřȱ AppointmentsȱClauseȱclaimȱwasȱinȱFreeȱEnterprise.ȱȱSeeȱanteȱatȱ16Ȭ1ű.ȱȱWeȱareȱnotȱ
ŗ4ȱ persuadedȱbyȱtheȱanalogy.ȱȱTheȱSupremeȱCourtȇsȱjurisdictionalȱconclusionȱinȱFreeȱ
ŗśȱ Enterpriseȱwas,ȱinȱourȱview,ȱshapedȱprincipallyȱbyȱtheȱabsenceȱofȱtheȱtypeȱofȱ
ŗŜȱ proceduralȱlinkȱbetweenȱconstitutionalȱclaimȱandȱadministrativeȱproceedingȱthatȱ
ŗ7ȱ existsȱhere.ȱȱTheȱaccountingȱfirmȱobjectedȱtoȱactionsȱthatȱtheȱPCAOBȱhadȱtakenȱ
ŗ8ȱ entirelyȱoutsideȱtheȱscopeȱofȱtheȱSECȇsȱschemeȱofȱadministrativeȱandȱjudicialȱ
Ř9 ŗȱ reviewȱ—ȱactionsȱthatȱcouldȱnotȱbeȱtheȱsubjectȱofȱȈanyȱCommissionȱordersȱ.ȱ.ȱ.ȱ
Řȱ fromȱwhichȱreviewȱmightȱbeȱsought.ȈȱȱFreeȱEnterprise,ȱ561ȱU.S.ȱatȱŮų0.ȱȱTheȱfirmȱ
řȱ filedȱsuitȱinȱfederalȱdistrictȱcourt,ȱandȱtheȱSupremeȱCourtȱallowedȱtheȱsuitȱtoȱ
4ȱ proceed,ȱbecauseȱtheȱAppointmentsȱClauseȱclaimȱwasȱnotȱmooredȱtoȱanyȱ
śȱ proceedingȱthatȱwouldȱprovideȱforȱanȱadministrativeȱadjudicationȱandȱ
Ŝȱ subsequentȱjudicialȱreview.ŜȱȱHere,ȱbyȱcontrast,ȱtheȱappellantsȇȱAppointmentsȱ
7ȱ Clauseȱclaimȱtargetsȱanȱaspectȱofȱanȱongoingȱadministrativeȱproceeding.ȱȱWeȱ
8ȱ thinkȱthatȱdistinctionȱsignificantlyȱaltersȱtheȱȈwhollyȱcollateralȈȱanalysis,ȱsuchȱ
9ȱ thatȱtheȱsecondȱThunderȱBasinȱfactorȱdoesȱnotȱfavorȱdistrictȱcourtȱjurisdictionȱinȱ
ŗŖȱ thisȱcase.ȱȱSeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ23ȱ(notingȱthatȱaȱconstitutionalȱchallengeȱmightȱ
ŗŗȱ qualifyȱasȱcollateralȱifȱitȱȈwereȱfiledȱinȱcourtȱbeforeȱtheȱinitiationȱofȱanyȱ
ŗŘȱ administrativeȱproceeding,ȈȱasȱinȱFreeȱEnterprise,ȱbutȱconcludingȱthatȱ
ȱInȱexplainingȱwhyȱtheȱaccountingȱfirmȇsȱAppointmentsȱClauseȱclaimȱqualifiedȱasȱ Ŝ
whollyȱcollateral,ȱtheȱFreeȱEnterpriseȱdecisionȱatȱoneȱpointȱcharacterizedȱtheȱclaimȱasȱanȱ Ȉobject[ion]ȱtoȱtheȱ[PCAOBȇs]ȱexistence.ȈȱȱśŜŗȱU.S.ȱatȱ49Ŗ.ȱȱLikeȱtheȱD.C.ȱCircuit,ȱweȱdoȱ notȱreadȱthatȱlanguageȱȈtoȱdefineȱaȱnewȱcategoryȱofȱcollateralȱclaimsȱthatȱfallȱoutsideȱanȱ otherwiseȱexclusiveȱadministrativeȱscheme.ȈȱȱJarkesy,ȱ8ŖřȱF.řdȱatȱŘ4.ȱȱInȱourȱview,ȱtheȱ SupremeȱCourtȱclassifiedȱtheȱaccountingȱfirmȇsȱclaimȱasȱwhollyȱcollateralȱbecauseȱtheȱ PCAOBȇsȱdisputedȱactionsȱcouldȱnotȱbeȱreviewedȱbyȱtheȱCommission,ȱwhichȱmeantȱthatȱ theȱfirmȇsȱAppointmentsȱClauseȱchallengeȱtoȱthoseȱactionsȱfellȱentirelyȱoutsideȱtheȱscopeȱ ofȱtheȱadministrativeȱschemeȱandȱcouldȱnotȱbeȱresolvedȱbyȱaȱCommissionȱȈorder[]ȱ.ȱ.ȱ.ȱ fromȱwhichȱ[judicial]ȱreviewȱmightȱbeȱsought.ȈȱȱFreeȱEnterprise,ȱśŜŗȱU.S.ȱatȱ49Ŗ.ȱ
řŖ ŗȱ constitutionalȱchallengesȱwereȱnotȱcollateralȱwhenȱraisedȱinȱresponseȱtoȱȈmultipleȱ
Řȱ aspectsȱofȱ[an]ȱongoingȱproceedingȈ).ȱ
řȱ C.ȱ AgencyȱExpertiseȱ
4ȱ TheȱfinalȱconsiderationȱwithinȱtheȱThunderȱBasinȱframeworkȱisȱwhetherȱtheȱ
śȱ appellantsȇȱAppointmentsȱClauseȱclaimȱfallsȱoutsideȱtheȱSECȇsȱexpertise.ȱȱThisȱisȱaȱ
Ŝȱ closeȱquestion.ȱȱAsȱanȱinitialȱmatter,ȱtheȱSupremeȱCourtȇsȱdecisionȱinȱFreeȱ
7ȱ EnterpriseȱsuggestsȱthatȱtheȱSECȱdoesȱnotȱpossessȱuniqueȱlegalȱexpertiseȱinȱ
8ȱ analyzingȱtheȱconstitutionalȱsufficiencyȱofȱitsȱappointments.ȱȱThere,ȱtheȱCourtȱ
9ȱ concludedȱthatȱtheȱmeritsȱofȱanȱAppointmentsȱClauseȱchallengeȱtoȱtheȱPCAOBȱ
ŗŖȱ fellȱȈoutsideȱtheȱCommissionȇsȱcompetenceȱandȱexpertiseȈȱbecauseȱtheȱclaimȱ
ŗŗȱ raisedȱonlyȱȈstandardȱquestionsȱofȱadministrativeȱlaw,Ȉȱwhichȱwereȱunrelatedȱtoȱ
ŗŘȱ anyȱȈstatutoryȈȱorȱȈfactȬboundȱinquiriesȈȱthatȱtheȱSECȱmightȱbeȱsingularlyȱ
ŗřȱ qualifiedȱtoȱperform.ȱȱ561ȱU.S.ȱatȱŮų1.ȱ
ŗ4ȱ UnderȱToucheȱRoss,ȱthatȱconclusionȱmightȱendȱourȱanalysisȱofȱagencyȱ
ŗśȱ expertise.ȱȱAsȱnoted,ȱtheȱpanelȱthereȱpermittedȱrespondentsȱtoȱchallengeȱanȱ
ŗŜȱ ongoingȱSECȱadministrativeȱproceedingȱinȱfederalȱdistrictȱcourtȱsolelyȱbecauseȱ
ŗ7ȱ theȱlegalȱsubstanceȱofȱtheȱchallengeȱfellȱoutsideȱtheȱadministrativeȱtribunalȇsȱ
ŗ8ȱ expertiseȱandȱcouldȱnotȱbeȱusefullyȱdevelopedȱthroughȱitsȱfactfinding.ȱȱ60ųȱF.2dȱ
řŗ ŗȱ atȱ5űű.ȱȱButȱtheȱSupremeȱCourtȱhasȱsinceȱadoptedȱaȱbroaderȱconceptionȱofȱagencyȱ
Řȱ expertiseȱinȱtheȱjurisdictionalȱcontext.ȱȱElgin,ȱinȱparticular,ȱemphasizesȱthatȱanȱ
řȱ agencyȱmayȱbringȱitsȱexpertiseȱtoȱbearȱonȱaȱconstitutionalȱclaimȱindirectly,ȱbyȱ
4ȱ resolvingȱaccompanying,ȱpotentiallyȱdispositiveȱissuesȱinȱtheȱsameȱproceeding.ȱȱ
śȱ SeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ2ŲȬ2ųȱ(notingȱthatȱȈElginȱ.ȱ.ȱ.ȱclarifiedȱ.ȱ.ȱ.ȱthatȱanȱagencyȇsȱ
Ŝȱ relative[lyȱlow]ȱlevelȱofȱinsightȱintoȱtheȱmeritsȱofȱaȱconstitutionalȱquestionȱisȱnotȱ
7ȱ determinativeȈȱofȱwhetherȱtheȱagencyȱcanȱbringȱitsȱexpertiseȱtoȱbear).ȱ
8ȱ InȱElgin,ȱfederalȱemployeesȱwhoȱallegedlyȱhadȱbeenȱdischargedȱforȱ
9ȱ violatingȱaȱstatutoryȱcommandȱsoughtȱreinstatementȱbyȱchallengingȱtheȱ
ŗŖȱ constitutionalityȱofȱtheȱstatute.ȱȱCongressȱhadȱpreviouslyȱcreatedȱanȱ
ŗŗȱ administrativeȱprocessȱtoȱadjudicateȱspecifiedȱpersonnelȱdecisionsȱregardingȱ
ŗŘȱ federalȱemployees,ȱwhichȱwasȱconductedȱinitiallyȱbyȱtheȱMeritȱSystemsȱ
ŗřȱ ProtectionȱBoardȱ(ȈMSPBȈ)ȱandȱsubjectȱtoȱreviewȱinȱtheȱFederalȱCircuit.ȱȱBeforeȱ
ŗ4ȱ completingȱthatȱadministrativeȱprocess,ȱtheȱemployeesȱattemptedȱtoȱraiseȱtheirȱ
ŗśȱ constitutionalȱchallengeȱtoȱtheȱstatuteȱinȱfederalȱdistrictȱcourt.ȱȱInȱanȱeffortȱtoȱ
ŗŜȱ establishȱfederalȱjurisdiction,ȱtheyȱcontendedȱthatȱtheȱclaimȱfellȱoutsideȱtheȱ
ŗ7ȱ MSPBȇsȱexpertiseȱbecauseȱtheȱMSPBȱdisclaimedȱauthorityȱtoȱdetermineȱtheȱ
ŗ8ȱ constitutionalityȱofȱaȱfederalȱstatute.ȱȱElgin,ȱ132ȱS.ȱCt.ȱatȱ2130Ȭ31,ȱ21Ů0.ȱ
řŘ ŗȱ TheȱSupremeȱCourtȱdisagreed.ȱȱAlthoughȱtheȱMSPBȱhadȱindeedȱdisclaimedȱ
Řȱ authorityȱtoȱresolveȱconstitutionalȱchallengesȱtoȱstatutes,ȱtheȱCourtȱidentifiedȱ
řȱ severalȱwaysȱinȱwhichȱtheȱagencyȱmightȱȈotherwiseȈȱbringȱitsȱexpertiseȱȈtoȱbearȈȱ
4ȱ inȱproceedingsȱthatȱraisedȱthoseȱchallenges.ȱȱFirst,ȱtheȱMSPBȱcouldȱresolveȱ
śȱ ȈpreliminaryȱquestionsȱuniqueȱtoȱtheȱemploymentȱcontextȈȱthatȱmightȱȈobviateȱ
Ŝȱ theȱneedȱtoȱaddressȱtheȱconstitutionalȱchallenge.ȈȱȱId.ȱatȱ21Ů0.ȱȱSecond,ȱȈtheȱ
7ȱ challengedȱstatuteȱ[could]ȱbeȱoneȱthatȱtheȱMSPBȱregularlyȱconstrues,ȱandȱitsȱ
8ȱ statutoryȱinterpretationȱcouldȱalleviateȱconstitutionalȱconcerns.ȈȱȱId.ȱȱAndȱthird,ȱ
9ȱ Ȉanȱemployeeȇsȱappealȱ[could]ȱinvolveȱotherȱstatutoryȱorȱconstitutionalȱclaimsȱ
ŗŖȱ thatȱtheȱMSPBȱroutinelyȱconsiders,ȱinȱadditionȱtoȱaȱconstitutionalȱchallengeȱtoȱaȱ
ŗŗȱ federalȱstatute,ȈȱwhoseȱresolutionȱȈinȱtheȱemployeeȇsȱfavorȱmightȱfullyȱdisposeȱofȱ
ŗŘȱ theȱcase.ȈȱȱId.ȱȱInȱlightȱofȱthoseȱpotentialȱapplicationsȱofȱagencyȱexpertiseȱtoȱotherȱ
ŗřȱ dimensionsȱofȱtheȱadministrativeȱproceeding,ȱtheȱCourtȱconcludedȱthatȱthereȱwasȱ
ŗ4ȱ ȈnoȱreasonȱtoȱconcludeȱthatȱCongressȱintendedȱtoȱexemptȈȱtheȱemployeesȇȱ
ŗśȱ constitutionalȱchallengeȱȈfromȱexclusiveȱreviewȱbeforeȱtheȱMSPBȱandȱtheȱFederalȱ
ŗŜȱ Circuit.ȈȱȱId.ȱ
ŗ7ȱ ApplyingȱElginȇsȱapproachȱhere,ȱweȱthinkȱthatȱtheȱSECȱmightȱbringȱitsȱ
ŗ8ȱ expertiseȱtoȱbearȱonȱtheȱappellantsȇȱproceedingȱbyȱresolvingȱaccompanyingȱ
řř ŗȱ statutoryȱclaimsȱthatȱitȱȈroutinelyȱconsiders,ȈȱandȱwhichȱȈmightȱfullyȱdisposeȱofȱ
Řȱ theȱcaseȈȱinȱtheȱappellantsȇȱfavor.ȱȱ132ȱS.ȱCt.ȱatȱ21Ů0.ȱȱInȱparticular,ȱtheȱ
řȱ CommissionȱcouldȱruleȱthatȱtheȱappellantsȱdidȱnotȱviolateȱtheȱInvestmentȱ
4ȱ AdvisersȱAct,ȱinȱwhichȱcaseȱtheȱconstitutionalȱquestionȱwouldȱbecomeȱmoot.ȱȱȱ
śȱ Itȱmayȱbeȱarguedȱthatȱtheȱapplicationȱofȱagencyȱexpertiseȱtoȱtheȱstatutoryȱ
Ŝȱ issuesȱinȱtheȱappellantsȇȱproceedingȱwouldȱimproperlyȱskipȱoverȱtheirȱ
7ȱ AppointmentsȱClauseȱclaim,ȱwhichȱraisesȱaȱȈthresholdȈȱissueȱthatȱlogicallyȱ
8ȱ precedesȱaȱmeritsȱadjudication.ȱȱAlthoughȱweȱareȱmindfulȱofȱthatȱconcern,ȱtheȱ
9ȱ SupremeȱCourtȱappearsȱtoȱhaveȱrejectedȱanȱanalogousȱargumentȱinȱStandardȱOil.ȱȱ
ŗŖȱ There,ȱtheȱrespondentȱoilȱcompany,ȱlikeȱtheȱappellantsȱhere,ȱsoughtȱtoȱraiseȱaȱ
ŗŗȱ ȈthresholdȈȱchallengeȱtoȱitsȱadministrativeȱproceedingȱasȱaȱwholeȱsoonȱafterȱtheȱ
ŗŘȱ proceedingȱbegan.ȱȱTheȱNinthȱCircuitȱpermittedȱtheȱdistrictȱcourtȱtoȱexerciseȱ
ŗřȱ jurisdictionȱoverȱthatȱchallenge,ȱinȱpartȱbecauseȱitȱfearedȱthatȱtheȱoilȱcompanyȇsȱ
ŗ4ȱ victoryȱonȱotherȱgroundsȱinȱtheȱadministrativeȱproceedingȱwouldȱevade,ȱandȱ
ŗśȱ improperlyȱȈmoot,Ȉȱtheȱthresholdȱissue.ȱȱStandardȱOilȱCo.ȱofȱCal.ȱv.ȱFTC,ȱ5ų6ȱF.2dȱ
ŗŜȱ 13Ų1,ȱ13Ųűȱ(ųthȱCir.ȱ1ųűų),ȱrevȇd,ȱŮŮųȱU.S.ȱ232ȱ(1ųŲ0).ȱȱTheȱSupremeȱCourtȱ
ŗ7ȱ expresslyȱrejectedȱthatȱrationaleȱandȱreversed,ȱexplaining:ȱ
ŗ8ȱ [O]neȱofȱtheȱprincipalȱreasonsȱtoȱawaitȱtheȱterminationȱofȱagencyȱ ŗ9ȱ proceedingsȱisȱtoȱobviateȱallȱoccasionȱforȱjudicialȱreview.ȱȱThus,ȱtheȱ
ř4 ŗȱ possibilityȱthatȱ[theȱoilȱcompanyȇs]ȱchallengeȱmayȱbeȱmootedȱinȱ Řȱ adjudicationȱwarrantsȱtheȱrequirementȱthatȱ[theȱcompany]ȱpursueȱ řȱ adjudication,ȱnotȱshortcutȱit.ȱ 4ȱ ȱ śȱ StandardȱOil,ȱŮŮųȱU.S.ȱatȱ2ŮŮȱn.11ȱ(internalȱquotationȱmarksȱandȱcitationsȱ
Ŝȱ omitted).ȱȱInȱlightȱofȱthatȱpassage,ȱweȱareȱinclinedȱtoȱreadȱElginȇsȱmentionȱofȱ
7ȱ ȈotherȱstatutoryȱorȱconstitutionalȱclaimsȈȱthatȱmightȱȈfullyȱdisposeȱofȱtheȱcase,Ȉȱ
8ȱ 132ȱS.ȱCt.ȱatȱ21Ů0,ȱtoȱincludeȱtheȱInvestmentȱAdvisersȱActȱchargesȱhere.ȱ
9ȱ SuchȱaȱreadingȱofȱElginȱdovetailsȱwithȱourȱanalysisȱofȱtheȱavailabilityȱofȱ
ŗŖȱ meaningfulȱjudicialȱreview.ȱȱWeȱhaveȱalreadyȱconcluded,ȱinȱkeepingȱwithȱ
ŗŗȱ establishedȱfederalȱpracticeȱregardingȱanalogousȱdisputes,ȱthatȱtheȱappellantsȱ
ŗŘȱ mayȱadequatelyȱvindicateȱtheirȱAppointmentsȱClauseȱclaimȱbyȱfirstȱawaitingȱaȱ
ŗřȱ finalȱCommissionȱorderȱandȱthenȱpetitioningȱforȱjudicialȱreviewȱonȱconstitutionalȱ
ŗ4ȱ groundsȱonlyȱifȱtheȱorderȱisȱadverse.ȱȱByȱtheȱsameȱlogic,ȱaȱfavorableȱCommissionȱ
ŗśȱ order,ȱincludingȱoneȱonȱstatutoryȱgrounds,ȱwouldȱprovideȱanȱacceptableȱ
ŗŜȱ resolutionȱofȱtheȱAppointmentsȱClauseȱclaimȱandȱobviateȱanyȱneedȱforȱjudicialȱ
ŗ7ȱ review.ȱȱItȱfollows,ȱweȱthink,ȱthatȱtheȱCommissionȱmayȱbringȱitsȱexpertiseȱtoȱbearȱ
ŗ8ȱ inȱaȱmannerȱpotentiallyȱrelevantȱtoȱtheȱconstitutionalȱissueȱbyȱresolvingȱtheȱ
ŗ9ȱ statutoryȱchargesȱagainstȱtheȱappellants.ȱȱForȱthatȱreason,ȱtheȱfinalȱThunderȱBasinȱ
ŘŖȱ factorȱlendsȱminimalȱsupportȱtoȱtheȱappellantsȇȱjurisdictionalȱargument.ȱȱSeeȱ
řś ŗȱ Jarkesy,ȱŲ03ȱF.3dȱatȱ2ųȱ(concludingȱthatȱȈtheȱCommissionȇsȱexpertiseȱcanȱotherwiseȱ
Řȱ beȱbroughtȱtoȱbearȱonȱtheȱissuesȱinȱ[theȱrespondentȇs]ȱproceedingȈȱbecauseȱȈtheȱ
řȱ agencyȱcouldȱmootȱtheȱneedȱtoȱresolveȈȱtheȱrespondentȇsȱconstitutionalȱclaims,ȱ
4ȱ includingȱseveralȱthresholdȱchallengesȱtoȱtheȱproceedingȱasȱaȱwhole,ȱȈbyȱfindingȱ
śȱ thatȱheȱdidȱnotȱcommitȱtheȱsecuritiesȬlawȱviolationsȱofȱwhichȱheȱstandsȱaccusedȈȱ
Ŝȱ (internalȱquotationȱmarksȱomitted));ȱBebo,ȱűųųȱF.3dȱatȱűű3ȱ(ȈElginȱexplainedȱthatȱ
7ȱ theȱpossibilityȱthatȱ[theȱrespondent]ȱmightȱprevailȱinȱtheȱadministrativeȱ
8ȱ proceedingȱ(andȱtherebyȱavoidȱtheȱneedȱtoȱraiseȱherȱconstitutionalȱclaimsȱinȱanȱ
9ȱ ArticleȱIIIȱcourt)ȱdoesȱnotȱrenderȱtheȱstatutoryȱreviewȱschemeȱinadequate.Ȉ).ȱ
ŗŖȱ CONCLUSIONȱ
ŗŗȱ AfterȱconsideringȱeachȱofȱtheȱThunderȱBasinȱfactors,ȱweȱconcludeȱthatȱ
ŗŘȱ CongressȱintendedȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱȈtoȱbeȱreviewedȱ
ŗřȱ withinȈȱtheȱSECȇsȱexclusiveȱȈstatutoryȱstructure.ȈȱȱFreeȱEnterprise,ȱ561ȱU.S.ȱatȱŮŲųȱ
ŗ4ȱ (quotingȱThunderȱBasin,ȱ510ȱU.S.ȱatȱ20ű).ȱȱTheȱȈthresholdȈȱnatureȱofȱtheȱclaimȱdoesȱ
ŗśȱ notȱdefeatȱtheȱpresumptionȱthatȱit,ȱlikeȱotherȱproceduralȱandȱsubstantiveȱ
ŗŜȱ defensesȱtoȱanȱenforcementȱaction,ȱmustȱbeȱresolvedȱinȱtheȱfirstȱinstanceȱthroughȱ
ŗ7ȱ agencyȱproceedings.ȱȱToȱtheȱcontrary:ȱȱȈManyȱrespondentsȱinȱSECȱproceedingsȱ
ŗ8ȱ joinȱsubstantiveȱdefensesȱtoȱtheirȱsecuritiesȱchargesȱtogetherȱwithȱchallengesȱtoȱ
řŜ ŗȱ theȱCommissionȇsȱactionsȱorȱauthority.ȱȱItȱmakesȱgoodȱsenseȱtoȱconsolidateȱallȱofȱ
Řȱ eachȱrespondentȇsȱissuesȱbeforeȱoneȱcourtȱforȱreview,ȱandȱonlyȱafterȱanȱadverseȱ
řȱ Commissionȱorderȱmakesȱthatȱreviewȱnecessary.ȈȱȱJarkesy,ȱŲ03ȱF.3dȱatȱ2ųȬ30.ȱȱWeȱ
4ȱ thereforeȱconclude,ȱinȱkeepingȱwithȱtheȱdecisionsȱofȱtheȱSeventhȱandȱD.C.ȱ
śȱ CircuitsȱinȱBeboȱandȱJarkesy,ȱthatȱtheȱappellantsȱmustȱawaitȱaȱfinalȱCommissionȱ
Ŝȱ orderȱbeforeȱraisingȱtheirȱAppointmentsȱClauseȱclaimȱinȱfederalȱcourt.ȱȱTheȱ
7ȱ judgmentȱofȱtheȱdistrictȱcourtȱisȱAFFIRMED,ȱandȱourȱstayȱonȱfurtherȱproceedingsȱ
8ȱ byȱtheȱSECȱisȱVACATED.ȱ
ř7 Tilton v. Securities and Exchange Commission Docket No. 15-2103
Jon O. Newman, Circuit Judge, concurring:
An additional reason why the Appellants in this case must
raise their Appointments Clause issue by filing a petition for
review in a court of appeals rather than initiate a new action
in a district court is a concept that has been called
“colorable jurisdiction.” As the Seventh Circuit has
explained in a case challenging an order of criminal contempt,
"If a court has colorable jurisdiction of a case, though later
it is determined that actually it didn't have jurisdiction, an
order of criminal contempt issued by the court before the
absence of jurisdiction is determined is valid." Mann v.
Calumet City, 588 F.3d 949, 954 (7th Cir. 2009).
The Supreme Court, without using the phrase “colorable
jurisdiction,” made the same point in United States v. United
Mine Workers of America, 330 U.S. 258 (1947). The Court there
ruled that even if the constitutionality of a statute is in
doubt, an order issued by a court under that statute must be
obeyed and enforced even by criminal contempt. See id. at 293.
The Court noted that "a different result would follow were the
question of jurisdiction frivolous and not substantial," id.,
or, as Justice Frankfurter’s concurrence put it, the "court is
1 so obviously traveling outside its orbit as to be merely
usurping judicial forms and facilities," id. at 309
(Frankfurter, J., concurring).
The concept of colorable jurisdiction has also been
deemed relevant to the availability of a collateral attack to
challenge a judgment for lack of subject matter jurisdiction.
Courts have distinguished between an erroneous assertion of
subject matter jurisdiction, where collateral attack is
precluded by res judicata, and a clear usurpation of judicial
power, where collateral attack is permitted. See Nemaizer v.
Baker, 793 F.2d 58, 65 (2d Cir. 1986) (collecting cases); see
also Restatement (Second) of Judgments § 12(1) (1982).
“Collateral attack is available only if the assertion of
subject matter jurisdiction was without colorable basis, not
merely erroneous." In re U.S. Catholic Conference, 824 F.2d
156, 165 (2d Cir. 1987), rev'd on other grounds, U.S. Catholic
Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72
(1988) (on direct appeal, nonparty witness held in civil
contempt may challenge subject matter jurisdiction of court in
underlying action).
The Administrative Law Judge (“ALJ”) that will be hearing
the pending administrative proceeding against the Appellants
is not an interloper. The ALJ is an official of the agency,
2 facially clothed with authority to adjudicate the proceeding
before her. Whether her appointment comports with the
Appointments Clause is a fair question, but there is surely a
plausible basis for arguing that her appointment is valid.
With colorable jurisdiction, the ALJ may adjudicate the
administrative case, and the losing party will have its
opportunity to seek review before the Commission and then
petition for review of a final order in a Court of Appeals,
see 15 U.S.C. § 80b-13(a).
For this additional reason, I concur in Judge Sack’s
opinion for the Court.
3 ȱ
1 DRONEY,ȱCircuitȱJudge,ȱdissenting:ȱ
2 ThisȱcaseȱisȱnearlyȱindistinguishableȱfromȱFreeȱEnterpriseȱFundȱ
3 v.ȱPublicȱCo.ȱAccountingȱOversightȱBoard,ȱ561ȱU.S.ȱ477ȱ(2010).ȱȱItȱdiffersȱ
4 inȱonlyȱoneȱsignificantȱway:ȱadministrativeȱproceedingsȱhaveȱbegunȱ
5 againstȱtheȱ appellants.ȱ ȱ Theȱmajorityȱ concludesȱthatȱ thisȱ distinctionȱ
6 aloneȱ warrantsȱ aȱ differentȱ outcome,ȱ findingȱ thatȱ theȱ factȱ ofȱ theȱ
7 ongoingȱ proceedingsȱ meansȱ thatȱ theȱ threeȱ factorsȱ identifiedȱ byȱ theȱ
8 SupremeȱCourtȱinȱThunderȱBasinȱCoalȱCo.ȱv.ȱReich,ȱ510ȱU.S.ȱ200ȱ(1994)ȱ
9 forȱ determiningȱ whetherȱ Congressȱ intendedȱ toȱ limitȱ jurisdictionȱ ofȱ
10 theȱ districtȱ courtsȱ areȱ satisfied.ȱ ȱ Consequently,ȱ theȱ majorityȱ holdsȱ
11 thatȱthereȱwasȱnoȱsubjectȱmatterȱjurisdictionȱbeforeȱtheȱdistrictȱcourt.ȱ
12 Iȱ respectfullyȱ dissent.ȱ ȱ Theȱ majority’sȱ applicationȱ ofȱ theȱ
13 Thunderȱ Basinȱ factorsȱ hasȱ strippedȱ theȱ “whollyȱ collateral”ȱ andȱ
14 “outsideȱ theȱ agency’sȱ expertise”ȱ factorsȱ ofȱ anyȱ significance:ȱ inȱ itsȱ
15 view,ȱ asȱ longȱ asȱ administrativeȱ proceedingsȱ haveȱ beenȱ initiated,ȱ
16 thoseȱ twoȱ factorsȱ areȱ alwaysȱ satisfied.ȱ ȱ Theȱ majorityȱ basesȱ itsȱ 1 understandingȱofȱthisȱsubstantiveȬtoȬproceduralȱswitchȱinȱthoseȱtwoȱ
2 factorsȱ onȱ theirȱ applicationȱ byȱ theȱ Supremeȱ Courtȱ inȱ Elginȱ v.ȱ
3 Departmentȱ ofȱ Treasury,ȱ 132ȱ S.ȱ Ct.ȱ 2126ȱ (2012),ȱ butȱ theȱ natureȱ ofȱ theȱ
4 constitutionalȱ claimȱ presentedȱ inȱ Elginȱ wasȱ entirelyȱ different.ȱ ȱ Iȱ
5 disagreeȱ withȱ theȱ majority’sȱ interpretationȱ ofȱ Elginȱ andȱ concludeȱ
6 thatȱthoseȱtwoȱThunderȱBasinȱfactorsȱmustȱbeȱanalyzedȱsubstantivelyȱ
7 toȱdetermineȱtheirȱweightȱinȱeachȱparticularȱcase.ȱȱȱ
8 IȱconcludeȱthatȱFreeȱEnterpriseȱcontrolsȱhere.ȱȱInȱmyȱview,ȱthoseȱ
9 twoȱfactorsȱhereȱhaveȱpreciselyȱtheȱsameȱweightȱasȱtheyȱdidȱinȱFreeȱ
10 Enterprise,ȱ andȱ theȱ applicationȱ ofȱ theȱ remainingȱ factorȱ doesȱ notȱ
11 changeȱ theȱ result.ȱ ȱ Thus,ȱ Iȱ wouldȱ findȱ thatȱ theȱ districtȱ courtȱ hadȱ
12 subjectȱmatterȱjurisdictionȱtoȱconsiderȱtheȱconstitutionalȱchallenge.ȱȱȱ
13 I. TheȱThunderȱBasinȱFactorsȱ
14 Theȱ Supremeȱ Courtȱ inȱ Thunderȱ Basinȱ identifiedȱ theȱ followingȱ
15 threeȱ factorsȱ asȱ helpfulȱ inȱ determiningȱ whetherȱ aȱ statuteȱ whichȱ
16 providesȱforȱadministrativeȱreviewȱofȱagencyȱactionȱwasȱintendedȱbyȱ
2ȱ 1 Congressȱtoȱprecludeȱdistrictȱcourtȱjurisdictionȱoverȱclaimsȱbeforeȱaȱ
2 finalȱ administrativeȱ determination:ȱ whetherȱ theȱ claimsȱ areȱ “whollyȱ
3 collateralȱ toȱ aȱ statuteȇsȱ reviewȱ provisions,”ȱ whetherȱ theyȱ areȱ
4 “outsideȱ theȱ agencyȇsȱ expertise,”ȱ andȱ whetherȱ “aȱ findingȱ ofȱ
5 preclusionȱ couldȱ forecloseȱ allȱ meaningfulȱ judicialȱ review.”ȱ ȱ Id.ȱ atȱ
6 212–13ȱ (internalȱ quotationȱ marksȱ omitted).ȱ ȱ Theȱ Courtȱ referredȱ toȱ
7 eachȱ asȱ helpingȱ determineȱ whetherȱ itȱ isȱ “fairlyȱ discernible”ȱ fromȱ aȱ
8 “statutoryȱscheme”ȱthatȱCongressȱ“hasȱallocatedȱinitialȱreviewȱtoȱanȱ
9 administrativeȱbody.”ȱId.ȱatȱ207,ȱ212–13.1ȱȱȱ
10 Iȱ disagreeȱ somewhatȱ withȱ theȱ majority’sȱ interpretationȱ ofȱ theȱ
11 thirdȱ factor,ȱ “meaningfulȱ judicialȱ review,”ȱ butȱ itȱ isȱ theȱ majority’sȱ
1 The majority describes the Thunder Basin factors as coming into play only in the second part of a two-part test, seemingly splitting the analysis between asking (1) whether Congress intended to preclude district court jurisdiction and (2) whether Congress intended for the claims at issue to be reviewed within the statutory structure. Majority Op. at 10–11. I disagree with this dichotomy and the conclusion that the factors are relevant only to the second inquiry. See, e.g., Elgin, 132 S. Ct. at 2136 (referring to Thunder Basin factors as relevant to the single argument characterized variously as: “Congress does not intend to limit district court jurisdiction” (alterations omitted) and “[Petitioners’] claims are not the type that Congress intended to be reviewed within the [administrative] scheme”). However, the majority opinion does not return to this schema and thereafter focuses on the Thunder Basin factors as answering the ultimate question of whether the appellants are precluded from bringing their constitutional claims in the district court.
3ȱ 1 applicationȱ ofȱ theȱ twoȱ otherȱ factors—“whollyȱ collateral”ȱ andȱ
2 “outsideȱtheȱagency’sȱexpertise”—withȱwhichȱIȱmostȱdisagree.ȱȱȱ
3 Thereȱ areȱ threeȱ casesȱ inȱ whichȱ theȱ Supremeȱ Courtȱ hasȱ
4 reviewedȱ theȱ applicationȱ ofȱ theseȱ threeȱ factors:ȱ Thunderȱ Basin,ȱ Freeȱ
5 Enterprise,ȱandȱElgin.ȱȱȱȱInȱeach,ȱtheȱSupremeȱCourt’sȱanalysisȱofȱtheȱ
6 “whollyȱcollateral”ȱandȱ“outsideȱtheȱagency’sȱexpertise”ȱfactorsȱhasȱ
7 focusedȱonȱtheȱsubstanceȱofȱtheȱclaims.ȱ
8 Inȱ Thunderȱ Basin,ȱ aȱ nonȬunionȱ mineȱ ownerȱ filedȱ anȱ actionȱ inȱ
9 districtȱcourtȱchallengingȱitsȱemployees’ȱdesignationȱofȱcertainȱunionȱ
10 representativesȱ toȱ beȱ involvedȱ inȱ safetyȱ inspectionsȱ underȱ theȱ
11 Federalȱ Mineȱ Safetyȱ andȱ Healthȱ Amendmentsȱ Actȱ (“Mineȱ Act”).ȱȱ
12 Theȱ Mineȱ Actȱ providedȱ forȱ administrativeȱ hearingsȱ andȱ decisionsȱ
13 concerningȱ safetyȱ issues,ȱ andȱ ultimateȱ appealȱ toȱ theȱ Courtsȱ ofȱ
14 Appeals.ȱ ȱ Respondentsȱ contendedȱ thatȱ thisȱ “comprehensiveȱ reviewȱ
15 process,”ȱ id.ȱ atȱ 208,ȱ inȱ theȱ Mineȱ Actȱ indicatedȱ thatȱ Congressȱ
16 intendedȱ thatȱ theȱ safetyȱ claimȱ beȱ exclusivelyȱ reviewedȱ inȱ theȱ
4ȱ 1 “statutoryȱstructure,”ȱid.ȱatȱ212,ȱandȱthatȱthereȱwasȱnoȱsubjectȱmatterȱ
2 jurisdictionȱforȱtheȱmineȱowner’sȱsuitȱinȱtheȱdistrictȱcourt.ȱȱȱ
3 Inȱ itsȱ analysisȱ ofȱ whetherȱ theȱ mineȱ owner’sȱ claimsȱ mustȱ firstȱ
4 beȱ broughtȱ inȱ anȱ administrativeȱ proceeding,ȱ theȱ Supremeȱ Courtȱ
5 analyzedȱ theȱ “whollyȱ collateral”ȱ andȱ “outsideȱ theȱ agency’sȱ
6 expertise”ȱ factorsȱ onlyȱ byȱ consideringȱ theȱ substanceȱ ofȱ theȱ claimsȱ
7 withȱnoȱmentionȱofȱtheȱproceduralȱaspectsȱofȱtheȱcase.ȱȱId.ȱatȱ213–14ȱ
8 (notingȱ thatȱ “Petitioner’sȱ statutoryȱ claimsȱ atȱ rootȱ requireȱ
9 interpretationȱ ofȱ theȱ parties’ȱ rightsȱ andȱ dutiesȱ underȱ [theȱ Mineȱ Actȱ
10 andȱ accompanyingȱ regulations],ȱ andȱ asȱ suchȱ ariseȱ underȱ theȱ Mineȱ
11 Actȱ andȱ fallȱ squarelyȱ withinȱ theȱ Commission’sȱ expertise”ȱ andȱ thatȱ
12 theȱ agencyȱ hasȱ “extensiveȱ experienceȱ interpretingȱ theȱwalkȬaroundȱ
13 rights”ȱthatȱwereȱatȱissue).ȱȱȱ
14 Theȱ Supremeȱ Courtȱ engagedȱ inȱ theȱ sameȱ sortȱ ofȱ substantiveȱ
15 analysisȱinȱFreeȱEnterprise.ȱȱInȱFreeȱEnterprise,ȱanȱaccountingȱfirmȱfiledȱ
16 anȱ actionȱ inȱ theȱ districtȱ courtȱ whichȱ challengedȱ aȱ reportȱ issuedȱ byȱ
5ȱ 1 theȱ newlyȱ createdȱ Publicȱ Companyȱ Accountingȱ Oversightȱ Boardȱ
2 (“PCAOB”).ȱ ȱ Theȱ PCAOBȱ wasȱ createdȱ asȱ anȱ accountingȱ reformȱ inȱ
3 theȱSarbanesȬOxleyȱActȱofȱ2002ȱandȱitsȱmembersȱwereȱappointedȱbyȱ
4 theȱSEC.ȱȱTheȱreportȱhadȱcriticizedȱtheȱfirm’sȱaccountingȱprocedures,ȱ
5 butȱnoȱsanctionsȱwereȱimposed.ȱȱThus,ȱtheȱaccountingȱfirmȱcouldȱnotȱ
6 utilizeȱ theȱ statutoryȱ administrativeȱ reviewȱ proceedingsȱ availableȱ
7 beforeȱ theȱ SEC.ȱ ȱ Theȱ actionȱ inȱ theȱ districtȱ courtȱ byȱ theȱ accountingȱ
8 firmȱ challengedȱ theȱ appointmentsȱ ofȱ theȱ PCAOBȱ membersȱ byȱ theȱ
9 SEC,ȱ claimingȱ thatȱ theyȱ violatedȱ theȱ Appointmentsȱ Clauseȱ ofȱ theȱ
10 Constitutionȱandȱtheȱmembersȱhadȱnoȱauthorityȱtoȱissueȱtheȱnegativeȱ
11 report.ȱ ȱ Theȱ PCAOBȱ soughtȱ toȱ dismissȱ theȱ actionȱ onȱ theȱ basisȱ thatȱ
12 theȱ districtȱ courtȱ hadȱ noȱ subjectȱ matterȱ jurisdictionȱ toȱ considerȱ theȱ
13 accountingȱfirm’sȱclaim.ȱ
14 Inȱ itsȱ analysisȱ ofȱ theȱ “whollyȱ collateral”ȱ andȱ “outsideȱ theȱ
15 agency’sȱ review”ȱ factors,ȱ theȱ Freeȱ Enterpriseȱ Courtȱ examinedȱ theȱ
16 substanceȱofȱtheȱconstitutionalȱclaimȱasȱitȱrelatedȱtoȱagencyȱexpertise,ȱ
6ȱ 1 561ȱ U.S.ȱ atȱ 491ȱ (“[T]heȱ statutoryȱ questionsȱ involvedȱ doȱ notȱ requireȱ
2 technicalȱ considerationsȱ ofȱ agencyȱ policy.”ȱ (quotationȱ marksȱ andȱ
3 alterationsȱomitted)),ȱandȱexplainedȱtheȱ“whollyȱcollateral”ȱfactorȱinȱ
4 termsȱ ofȱ theȱ substantiveȱ contentȱ ofȱ theȱ challenge,ȱ id.ȱ atȱ 490.ȱ
5 (“[P]etitionersȱ objectȱ toȱ theȱ Board’sȱ existence,ȱ notȱ toȱ anyȱ ofȱ itsȱ
6 auditingȱ standards.ȱ ȱ Petitioners’ȱ generalȱ challengeȱ toȱ theȱ Boardȱ isȱ
7 collateralȱ toȱ anyȱ Commissionȱ ordersȱ orȱ rulesȱ fromȱ whichȱ reviewȱ
8 mightȱbeȱsought.”).ȱȱItȱmadeȱnoȱreferenceȱtoȱtheȱproceduralȱaspectsȱ
9 ofȱtheȱclaim.ȱ
10 II. Elginȱv.ȱDepartmentȱofȱTreasuryȱ
11 Theȱ thirdȱ caseȱ inȱ whichȱ theȱ Supremeȱ Courtȱ addressedȱ theȱ
12 Thunderȱ Basinȱ factorsȱ wasȱ Elginȱ v.ȱ Departmentȱ ofȱ Treasury,ȱ 132ȱ S.ȱ Ct.ȱ
13 2126ȱ (2012).ȱ ȱ Theȱ majorityȱ concludesȱ thatȱ theȱ Elginȱ Courtȱ
14 considerablyȱ alteredȱ theȱ “whollyȱ collateral”ȱ andȱ “outsideȱ theȱ
15 agency’sȱexpertise”ȱfactors,ȱbutȱIȱdisagree.ȱȱIȱbelieveȱtheȱoutcomeȱinȱ
7ȱ 1 Elginȱwasȱnotȱproducedȱbyȱvaryingȱthoseȱfactors,ȱbutȱbyȱtheȱdifferentȱ
2 typeȱofȱconstitutionalȱclaimȱpresented.ȱȱȱ
3 InȱElgin,ȱtheȱplaintiffsȱchallengedȱtheirȱdismissalȱfromȱfederalȱ
4 employmentȱforȱfailureȱtoȱcomplyȱwithȱtheȱMilitaryȱSelectiveȱServiceȱ
5 Actȱ byȱ notȱ registeringȱ forȱ theȱ draft.ȱ ȱ Althoughȱ theȱ plaintiffsȱ hadȱ
6 availableȱ toȱ themȱ theȱ rightȱ toȱ challengeȱ theirȱ dismissalsȱ throughȱ
7 administrativeȱ hearingsȱ beforeȱ theȱ Meritȱ Systemsȱ Protectionȱ Boardȱ
8 (“MSPB”)ȱandȱsubsequentȱjudicialȱreviewȱinȱtheȱFederalȱCircuit,ȱtheyȱ
9 insteadȱ broughtȱ suitȱ inȱ federalȱ districtȱ court.2ȱ ȱ Theirȱ constitutionalȱ
10 argumentsȱ wereȱ thatȱ theȱ Selectiveȱ Serviceȱ Actȱ discriminatesȱ onȱ theȱ
11 basisȱ ofȱ sexȱ byȱ requiringȱ onlyȱ malesȱ toȱ registerȱ andȱ isȱ aȱ billȱ ofȱ
12 attainder.ȱȱId.ȱatȱ2131.ȱȱNotably,ȱtheȱplaintiffsȱmadeȱnoȱchallengeȱtoȱ
13 theȱ availableȱ administrativeȱ process;ȱ theyȱ arguedȱ onlyȱ thatȱ theȱ
14 substanceȱ ofȱ theȱ lawsȱ beingȱ enforcedȱ againstȱ them—lawsȱ routinelyȱ
15 administeredȱ byȱ theȱ MSPB—wasȱ unconstitutional.ȱ ȱ Unsurprisingly,ȱ
2 One of the plaintiffs did pursue remedies through the MSPB, but declined to appeal the decision he received within the administrative system, instead joining the others in their suit in district court. Elgin, 132 S. Ct. at 2131.
8ȱ 1 then,ȱ theȱ Supremeȱ Court’sȱ analysisȱ ofȱ theȱ “whollyȱ collateral”ȱ andȱ
2 “outsideȱ ofȱ theȱ agency’sȱ expertise”ȱ factors,ȱ andȱ itsȱ conclusionȱ thatȱ
3 thoseȱ twoȱ factorsȱ inȱ Elginȱ weighedȱ inȱ favorȱ ofȱ dismissalȱ ofȱ theȱ
4 districtȱcourtȱaction,ȱwasȱnecessarilyȱquiteȱdifferentȱfromȱthatȱinȱFreeȱ
5 Enterprise.ȱ
6 Theȱ Supremeȱ Court’sȱ applicationȱ ofȱ theȱ “whollyȱ collateral”ȱ
7 factorȱ rejectedȱ theȱ plaintiffs’ȱ argumentȱ thatȱ theirȱ constitutionalȱ
8 claimsȱ hadȱ “nothingȱ toȱ do”ȱwithȱ theȱ“dayȬtoȬdayȱ personnelȱ actionsȱ
9 adjudicatedȱbyȱtheȱMSPB.”ȱȱId.ȱatȱ2139.ȱȱTheȱSupremeȱCourtȱpointedȱ
10 outȱthatȱaȱchallengeȱtoȱdismissalȱfromȱemploymentȱbasedȱonȱfederalȱ
11 statutesȱ isȱ “preciselyȱ theȱ typeȱ ofȱ personnelȱ actionȱ regularlyȱ
12 adjudicatedȱ byȱ theȱ MSPBȱ andȱ theȱ Federalȱ Circuitȱ withinȱ theȱ [Civilȱ
13 ServiceȱReformȱActȱ(“CSRA”)]ȱscheme.”ȱȱId.ȱatȱ2140.ȱȱWhetherȱorȱnotȱ
14 thatȱparticularȱchallengeȱinvolvedȱaȱconstitutionalȱquestion,ȱitȱwas—
15 inȱtheȱwordsȱofȱtheȱSupremeȱCourt—“aȱchallengeȱtoȱCSRAȬcoveredȱ
9ȱ 1 employmentȱactionȱbroughtȱbyȱCSRAȬcoveredȱemployeesȱrequestingȱ
2 reliefȱthatȱtheȱCSRAȱroutinelyȱaffords.”ȱȱId.ȱȱ
3 Theȱ majorityȱ hereȱ concludesȱ thatȱ Elginȱ heldȱ thatȱ “aȱ claimȱ isȱ
4 notȱ whollyȱ collateralȱ ifȱ itȱ hasȱ beenȱ raisedȱ inȱ responseȱ to,ȱ andȱ soȱ isȱ
5 procedurallyȱ intertwinedȱ with,ȱ anȱ administrativeȱ proceeding,”ȱ
6 Majorityȱ Op.ȱ atȱ 27,ȱ pointingȱ toȱ theȱ Supremeȱ Court’sȱ statementȱ thatȱ
7 theȱ constitutionalȱ claimsȱ inȱ Elginȱ wereȱ “theȱ vehicleȱ byȱ whichȱ [theȱ
8 petitioners]ȱs[ought]ȱtoȱreverseȱtheȱremovalȱdecisions”ȱmadeȱagainstȱ
9 them,ȱid.ȱatȱ2139.ȱȱHowever,ȱthatȱoverstatesȱwhatȱtheȱSupremeȱCourtȱ
10 didȱ inȱ itsȱ applicationȱ ofȱ thatȱ factor.ȱ ȱ Thatȱ portionȱ ofȱ theȱ opinionȱ
11 meantȱnothingȱmoreȱthanȱthatȱtheȱplaintiffsȱwereȱchallengingȱactionsȱ
12 againstȱthemȱunderȱtheȱstatutesȱcommittedȱtoȱtheȱMSPBȱbyȱattackingȱ
13 theȱconstitutionalityȱofȱthoseȱveryȱstatutes—itȱdoesȱnotȱsuggestȱthatȱ
14 noȱ challengeȱ thatȱ wouldȱ endȱ ongoingȱ proceedingsȱ couldȱ beȱ
15 consideredȱ collateralȱ toȱ aȱ statute’sȱ reviewȱ provisions.ȱ ȱ Suchȱ anȱ
16 interpretationȱwouldȱswallowȱtheȱrule,ȱforȱthereȱwouldȱnoȱlongerȱbeȱ
10ȱ 1 anyȱ needȱ toȱ evaluateȱ theȱ substanceȱ ofȱ aȱ claimȱ asȱ longȱ asȱ theȱ claimȱ
2 couldȱ somehowȱ serveȱ toȱ endȱ administrativeȱ proceedingsȱ inȱ aȱ
3 plaintiff’sȱ favor.ȱ ȱ Thisȱ isȱ inconsistentȱ withȱ Thunderȱ Basinȱ andȱ Freeȱ
4 Enterpriseȱ (and,ȱ inȱ fact,ȱ withȱ Elgin,ȱ whichȱ lookedȱ carefullyȱ atȱ theȱ
5 substanceȱ ofȱ theȱ challenge).ȱ ȱ Itȱ wouldȱ alsoȱ turnȱ theȱ factorȱ intoȱ anȱ
6 easy,ȱbinaryȱquestion:ȱIsȱaȱproceedingȱongoing?ȱȱIfȱyes,ȱthenȱnoȱclaimȱ
7 thatȱwouldȱendȱtheȱproceedingȱcanȱbeȱwhollyȱcollateral.ȱȱThisȱcannotȱ
8 beȱ whatȱ theȱ Elginȱ Courtȱ intended.ȱ ȱ Inȱ myȱ view,ȱ itȱ heldȱ onlyȱ thatȱ aȱ
9 claimȱinvolvingȱtheȱsubstanceȱofȱtheȱveryȱactȱentrustedȱtoȱtheȱagencyȱ
10 forȱimplementationȱandȱrequestingȱtheȱtypesȱofȱreliefȱthatȱtheȱagencyȱ
11 regularlyȱ gives—aȱ farȱ cryȱ fromȱ theȱ presentȱ case,ȱ whereȱ theȱ
12 constitutionalȱ claimȱ hasȱ noȱ relationȱ toȱ theȱ securitiesȱ lawsȱ entrustedȱ
13 toȱtheȱSECȱandȱtheȱrequestedȱremedyȱofȱdisallowingȱtheȱproceedingsȱ
14 beforeȱ theȱ ALJȱ isȱ obviouslyȱ notȱ aȱ routineȱ outcome—cannotȱ beȱ
15 consideredȱ“whollyȱcollateral”ȱtoȱtheȱadministrativeȱscheme.ȱ
11ȱ 1 Asȱ forȱ theȱ “outsideȱ theȱ agency’sȱ expertise”ȱ factor,ȱ theȱ Elginȱ
2 Courtȱmadeȱclearȱthatȱthisȱfactorȱwouldȱweighȱagainstȱjurisdictionȱinȱ
3 casesȱwhereȱaȱclaimȱneedingȱagencyȱexpertiseȱwasȱaȱ“threshold”ȱorȱ
4 “preliminaryȱquestion”ȱthatȱwouldȱ“obviateȱtheȱneedȱtoȱaddressȱtheȱ
5 constitutionalȱchallenge.”ȱȱId.ȱatȱ2140.ȱȱThisȱdescribedȱtheȱsituationȱinȱ
6 Elgin,ȱ whereȱ beforeȱ decidingȱ thatȱ theȱ Selectiveȱ Serviceȱ Actȱ wasȱ
7 unconstitutionalȱ theȱ MSPBȱ hadȱ toȱ decideȱ “thresholdȱ questions”ȱ toȱ
8 whichȱ theȱ MSPBȱ couldȱ applyȱ itsȱ expertise,ȱ suchȱ asȱ whetherȱ
9 constructiveȱ dischargeȱ occurredȱ asȱ wellȱ asȱ whetherȱ additionalȱ
10 claimedȱviolationsȱofȱemploymentȱstatutesȱtookȱplace,ȱwhichȱ“mightȱ
11 fullyȱdisposeȱofȱtheȱcase.”ȱȱId.ȱȱThoseȱdecisionsȱcouldȱbeȱinformedȱbyȱ
12 itsȱ agencyȱ expertiseȱ inȱ theȱ areaȱ ofȱ employmentȱ law.ȱ ȱ Id.ȱ ȱ Inȱ suchȱ aȱ
13 context,ȱ theȱ MSPB’sȱ expertiseȱ couldȱ properlyȱ beȱ “broughtȱ toȱ bear”ȱ
14 onȱ theȱ constitutionalȱ claim.ȱ ȱ Id.ȱ (quotingȱ Thunderȱ Basin,ȱ 510ȱ U.S.ȱ atȱ
15 214–15).ȱ ȱ Theȱ majorityȱ hereȱ acknowledgesȱ thatȱ anȱ issueȱ ofȱ federalȱ
16 jurisdictionȱ orȱ theȱ appropriateȱ compositionȱ ofȱ anȱ adjudicatoryȱ
12ȱ 1 body—suchȱasȱtheȱAppointmentsȱClauseȱchallengeȱpresentedȱinȱthisȱ
2 case—logicallyȱprecedesȱaȱmeritsȱadjudication;ȱtherefore,ȱthereȱisȱnoȱ
3 “threshold”ȱorȱ“preliminary”ȱquestionȱthatȱwouldȱ“obviateȱtheȱneedȱ
4 toȱaddressȱtheȱconstitutionalȱchallenge.”ȱȱ
5 Theȱ majorityȱ nonethelessȱ concludesȱ thatȱ theȱ Elginȱ Courtȱ
6 interpretedȱ thisȱ factorȱ toȱ meanȱ thatȱ “anȱ agencyȱ mayȱ bringȱ itsȱ
7 expertiseȱ toȱ bearȱ onȱ aȱ constitutionalȱ claimȱ indirectly,ȱ byȱ resolvingȱ
8 accompanying,ȱ potentiallyȱ dispositiveȱ issuesȱ inȱ theȱ sameȱ
9 proceeding.”ȱ ȱ Majorityȱ Op.ȱ atȱ 32.ȱ ȱ Itȱ doesȱ soȱ byȱ citingȱ theȱ Elginȱ
10 Court’sȱ referenceȱ toȱ aȱ situationȱ inȱ whichȱ anȱ appealȱ involvesȱ “otherȱ
11 statutoryȱorȱconstitutionalȱclaimsȱthatȱtheȱMSPBȱroutinelyȱconsiders,ȱ
12 inȱadditionȱtoȱaȱconstitutionalȱchallengeȱtoȱaȱfederalȱstatute.”ȱȱElgin,ȱ
13 132ȱ S.ȱ Ct.ȱ atȱ 2140.ȱ ȱ Theȱ majorityȱ thusȱ concludesȱ thatȱ anȱ issueȱ toȱ
14 whichȱ anȱ agencyȱ mayȱ applyȱ itsȱ expertiseȱ needȱ onlyȱ beȱ dispositive,ȱ
15 notȱ necessarilyȱ “preliminary,”ȱ forȱ itȱ toȱ weighȱ againstȱ jurisdiction.ȱȱ
16 MajorityȱOp.ȱatȱ33Ȭ34.ȱ
13ȱ 1 Thatȱ interpretationȱ doesȱ notȱ comportȱ withȱ theȱ languageȱ ofȱ
2 Elgin,ȱ however,ȱ whichȱ explicitlyȱ setȱ thatȱ descriptionȱ outȱ asȱ anȱ
3 exampleȱofȱaȱsituationȱinȱwhichȱthereȱmightȱbeȱ“thresholdȱquestions”ȱ
4 thatȱ wouldȱ allowȱ theȱ initialȱ agencyȱ reviewingȱ theȱ caseȱ toȱ notȱ reachȱ
5 theȱ constitutionalȱ question.3ȱ ȱ Norȱ wouldȱ suchȱ anȱ expansiveȱ
6 interpretationȱbeȱconsistentȱwithȱtheȱfactsȱunderlyingȱandȱtheȱsettingȱ
7 ofȱ Elgin,ȱ whereȱ theȱ potentiallyȱ dispositiveȱ issueȱ wasȱ clearlyȱ aȱ
8 “preliminary”ȱorȱ“thresholdȱquestion.”ȱ
9 ToȱreadȱElginȱasȱbroadlyȱasȱtheȱmajorityȱdoesȱwouldȱmeanȱthatȱ
10 asȱ longȱ asȱ aȱ proceedingȱ isȱ ongoing,ȱ theȱ “outsideȱ theȱ agency’sȱ
11 expertise”ȱfactorȱmustȱweighȱagainstȱjurisdiction—becauseȱanyȱtimeȱ
12 aȱproceedingȱhasȱcommencedȱthereȱisȱofȱcourseȱsomeȱpossibilityȱthatȱ
13 aȱplaintiffȱmayȱprevailȱonȱtheȱmerits.ȱȱThisȱwouldȱturnȱaȱsubstantiveȱ 3 That paragraph in Elgin makes clear that each of the sentences cited by the majority at Majority Op. 33 are examples of cases with “threshold questions,” not additional pathways to preclusion. See Elgin, 132 S. Ct. at 2140 (“But petitioners overlook the many threshold questions that may accompany a constitutional claim and to which the MSPB can apply its expertise. Of particular relevance here, preliminary questions unique to the employment context may obviate the need to address the constitutional challenge. For example, . . . In addition, . . . . Or, an employee’s appeal may involve other statutory or constitutional claims that the MSPB routinely considers, in addition to a constitutional challenge to a federal statute.” (emphases added)). The Supreme Court has elsewhere defined a “threshold question” as one “that must be resolved . . . .before proceeding to the merits [of another claim].” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 88–89 (1998).
14ȱ 1 factorȱ intoȱ aȱ purelyȱ procedural—andȱ binary—one,ȱ whichȱ isȱ
2 inconsistentȱwithȱtheȱdescriptionȱofȱtheȱfactorȱinȱThunderȱBasin,ȱFreeȱ
3 Enterprise,ȱorȱElginȱitself.ȱ
4 Inȱ sum,ȱ toȱ agreeȱ withȱ theȱ majority’sȱ interpretationȱ ofȱ Elgin,ȱ
5 oneȱ mustȱ concludeȱ thatȱ theȱ Supremeȱ Courtȱ intendedȱ toȱ eliminateȱ
6 anyȱsubstantiveȱanalysisȱofȱtheȱ“whollyȱcollateral”ȱandȱtheȱ“outsideȱ
7 theȱagency’sȱexpertise”ȱfactorsȱinȱanyȱcaseȱwhereȱanȱadministrativeȱ
8 proceedingȱ isȱ ongoing.4ȱ ȱ Toȱ theȱ contrary,ȱ Elginȱ itselfȱ engagesȱ withȱ
9 theȱ substanceȱ ofȱ theȱ precludedȱ claimsȱ inȱ aȱ wayȱ thatȱ theȱ majorityȱ
10 seemsȱtoȱbelieveȱisȱnowȱunnecessary.ȱȱȱ
11 Theȱmajority’sȱinterpretationȱalsoȱservesȱtoȱmoveȱtheȱThunderȱ
12 Basinȱfactorsȱawayȱfromȱtheirȱoriginalȱfunction,ȱwhichȱwasȱtoȱassistȱ
13 inȱ aȱ holisticȱ analysisȱ toȱ determineȱ whetherȱ itȱ isȱ “fairlyȱ discernible”ȱ
14 fromȱ aȱ “statutoryȱ scheme”ȱ thatȱ Congressȱ “hasȱ allocatedȱ initialȱ
15 reviewȱ toȱ anȱ administrativeȱ body.”ȱ Thunderȱ Basin,ȱ 510ȱ U.S.ȱ atȱ 207.ȱȱ 4 In fact, in Elgin, only one of the plaintiffs had initiated administrative proceedings; the others had filed suit directly in the district court but could have initiated proceedings. Elgin, 132 S.Ct. at 2131. Consequently, the implication of the majority’s reading of Elgin is likely to be even greater than this.
15ȱ 1 Elginȱrecognizedȱthisȱfunction:ȱitȱengagedȱinȱanȱextensiveȱanalysisȱofȱ
2 theȱ historyȱ andȱ structureȱ ofȱ theȱ relevantȱ statutesȱ beforeȱ turningȱ toȱ
3 theȱ Thunderȱ Basinȱ factors,ȱ whichȱ itȱ referredȱ toȱ asȱ “threeȱ additionalȱ
4 factorsȱinȱarguingȱthatȱ[theȱpetitioners’]ȱclaimsȱareȱnotȱtheȱtypeȱthatȱ
5 CongressȱintendedȱtoȱbeȱreviewedȱwithinȱtheȱCSRAȱscheme.”ȱȱ132ȱS.ȱ
6 Ct.ȱatȱ2136.ȱȱȱ
7 Iȱ wouldȱ applyȱ theȱ threeȱ Thunderȱ Basinȱ factorsȱ forȱ diviningȱ
8 legislativeȱintentȱfaithfulȱtoȱThunderȱBasin,ȱFreeȱEnterpriseȱandȱElgin.
9 III. ApplicationȱofȱtheȱThunderȱBasinȱFactorsȱ
10 A. “WhollyȱCollateralȱtoȱaȱStatute’sȱReviewȱProvisions”ȱ
11 Theȱ Supremeȱ Courtȱ inȱ Freeȱ Enterpriseȱ concludedȱ thatȱ theȱ
12 constitutionalȱ claimȱ thereȱ wasȱ “whollyȱ collateral”ȱ toȱ anyȱ
13 administrativeȱ proceedingsȱ thatȱ mightȱ beȱ broughtȱ againstȱ theȱ
14 plaintiffs.ȱȱThatȱchallengeȱwasȱessentiallyȱtheȱsameȱasȱtheȱchallengeȱ
15 here:ȱ thatȱ theȱ appointmentȱ ofȱ theȱ membersȱ ofȱ theȱ PCAOBȱ byȱ theȱ
16 SECȱ violatedȱ theȱ Appointmentsȱ Clauseȱ ofȱ theȱ Constitution.ȱ ȱ Itȱ
17 explainedȱ thatȱ theȱ plaintiffs’ȱ “generalȱ challengeȱ toȱ theȱ Boardȱ isȱ
16ȱ 1 ‘collateral’ȱ toȱ anyȱ Commissionȱ ordersȱ orȱ rulesȱ fromȱ whichȱ reviewȱ
2 mightȱbeȱsought”ȱbecauseȱtheyȱ“objectȱtoȱtheȱBoard’sȱexistence,ȱnotȱtoȱ
3 anyȱ ofȱ itsȱ auditingȱ standards.”ȱ ȱ Freeȱ Enterprise,ȱ 561ȱ U.S.ȱ atȱ 490ȱ
4 (emphasisȱ added).ȱ ȱ Here,ȱ asȱ well,ȱ theȱ appellantsȱ objectȱ toȱ theȱ veryȱ
5 existenceȱ ofȱ SECȱ administrativeȱ proceedingsȱ conductedȱ byȱ ALJsȱ
6 whoȱ are,ȱ inȱ theirȱ view,ȱ notȱ appointedȱ inȱ accordanceȱ withȱ theȱ
7 AppointmentsȱClause.ȱȱȱ
8 Theȱmajorityȱfindsȱthatȱthisȱfactorȱweighsȱagainstȱjurisdictionȱ
9 basedȱ onlyȱ onȱ itsȱ interpretationȱ ofȱ Elgin,ȱ whichȱ Iȱ haveȱ addressedȱ
10 above.ȱ ȱ Iȱ wouldȱ rejectȱ thatȱ interpretation.ȱ ȱ Iȱ seeȱ noȱ differenceȱ
11 betweenȱ theȱ Appointmentsȱ Clauseȱ challengeȱ inȱ Freeȱ Enterpriseȱ andȱ
12 here;ȱitȱisȱcompletelyȱcollateralȱtoȱtheȱworkȱofȱtheȱPCAOBȱasȱwellȱasȱ
13 toȱ theȱ workȱ ofȱ theȱ SECȱ andȱ itsȱ ALJs.ȱ ȱ Iȱ wouldȱ findȱ thatȱ thisȱ factorȱ
14 weighsȱstronglyȱinȱfavorȱofȱjurisdiction.ȱ
15 B. “OutsideȱtheȱAgency’sȱExpertise”ȱ
16 Inȱ Freeȱ Enterprise,ȱ theȱ Supremeȱ Courtȱ explainedȱ thatȱ theȱ
17 Appointmentsȱ Clauseȱ claimȱ relatingȱ toȱ theȱ appointmentȱ ofȱ theȱ
17ȱ 1 PCAOBȱbyȱtheȱSECȱwasȱ“outsideȱtheȱCommission’sȱcompetenceȱandȱ
2 expertise,”ȱrequiringȱnoȱunderstandingȱofȱaȱparticularȱindustryȱandȱ
3 noȱ “technicalȱ considerationsȱ ofȱ agencyȱ policy.”ȱ ȱ Id.ȱ atȱ 491ȱ (internalȱ
4 quotationȱ marksȱ andȱ alterationsȱ omitted).ȱ ȱ Theȱ sameȱ conclusionȱ
5 appliesȱ toȱ theȱ Appointmentsȱ Clauseȱ issueȱ here.ȱ ȱ Likeȱ theȱ
6 determinationȱ ofȱ theȱ appointmentȱ authorityȱ forȱ theȱ PCAOBȱ
7 membersȱ inȱ Freeȱ Enterprise,ȱ theȱ SECȱ hasȱ noȱ particularȱ expertiseȱ inȱ
8 determiningȱ whetherȱ theȱ systemȱ ofȱ appointingȱ itsȱ Administrativeȱ
9 Lawȱ Judgesȱ comportsȱ withȱ theȱ Appointmentsȱ Clauseȱ ofȱ theȱ
10 Constitution.ȱȱȱ
11 Theȱ majorityȱ agreesȱ asȱ farȱ asȱ Freeȱ Enterpriseȱ goes,ȱ concludingȱ
12 onlyȱ thatȱ thisȱ Thunderȱ Basinȱ factorȱ hasȱ beenȱ changedȱ byȱ Elgin.ȱ ȱ Forȱ
13 theȱ reasonsȱ discussedȱ above,ȱ Iȱ disagree.ȱ ȱ Iȱ seeȱ noȱ differenceȱ inȱ theȱ
14 applicationȱ ofȱ thisȱ factorȱ hereȱ toȱ theȱ SECȱ andȱ itsȱ applicationȱ toȱ theȱ
15 SECȱ inȱ Freeȱ Enterprise.ȱ ȱ Iȱ wouldȱ findȱ thatȱ thisȱ factorȱ alsoȱ weighsȱ
16 stronglyȱinȱfavorȱofȱjurisdiction.ȱ
18ȱ 1 C. ȱ“MeaningfulȱJudicialȱReview”ȱ
2 Theȱ “meaningfulȱ judicialȱ review”ȱ factorȱ presentsȱ theȱ onlyȱ
3 significantȱdifferenceȱbetweenȱtheȱpresentȱcaseȱandȱFreeȱEnterprise.ȱȱIȱ
4 agreeȱ withȱ theȱ majorityȱ thatȱ thisȱ factorȱ tendsȱ toȱ weighȱ inȱ favorȱ ofȱ
5 preclusionȱ becauseȱ aȱ subsequentȱ appealȱ toȱ thisȱ Courtȱ followingȱ aȱ
6 finalȱCommissionȱorderȱisȱavailable.ȱ
7 Nonetheless,ȱ Iȱ doȱ notȱ believeȱ thatȱ theȱ differenceȱ betweenȱ theȱ
8 availableȱ judicialȱ reviewȱ inȱ Freeȱ Enterpriseȱ andȱ inȱ thisȱ caseȱ isȱ soȱ
9 significantȱ asȱ toȱ justifyȱ aȱ differentȱ outcome,ȱ givenȱ theȱ identicalȱ
10 applicationȱofȱtheȱotherȱtwoȱfactors,ȱasȱwellȱasȱaȱsubstantialȱquestionȱ
11 asȱ toȱ whetherȱ subsequentȱ judicialȱ reviewȱ hereȱ wouldȱ beȱ
12 “meaningful.”ȱ
13 Theȱ majorityȱ isȱ correctȱ inȱ notingȱ thatȱ Freeȱ Enterpriseȱ differedȱ
14 fromȱ thisȱ caseȱ inȱ thatȱ noȱ reviewableȱ administrativeȱ orderȱ wasȱ
15 possibleȱ unlessȱ theȱ plaintiffȱ “manufactur[ed]ȱ aȱ new,ȱ tangentialȱ
16 disputeȱ thatȱ wouldȱ requireȱ aȱ Commissionȱ order.”ȱ ȱ Majorityȱ Op.ȱ ȱ atȱ
17 17.ȱ ȱ Andȱ asȱ theȱ Freeȱ Enterpriseȱ Courtȱ noted,ȱ “[w]eȱ normallyȱ doȱ notȱ
19ȱ 1 requireȱplaintiffsȱtoȱbetȱtheȱfarmȱbyȱtakingȱtheȱviolativeȱactionȱbeforeȱ
2 testingȱ theȱ validityȱ ofȱ [a]ȱ law.”ȱ ȱ 561ȱ U.S.ȱ atȱ 490ȱ (internalȱ quotationȱ
3 marksȱandȱalterationsȱomitted).ȱ
4 Theȱ Freeȱ Enterpriseȱ situationȱ wasȱ notȱ soȱ differentȱ fromȱ theȱ
5 presentȱ oneȱ asȱ toȱ requireȱ aȱ differentȱ outcome,ȱ however.ȱ ȱ Here,ȱ theȱ
6 administrativeȱ proceedingsȱ onceȱ concludedȱ wouldȱ haveȱ ledȱ toȱ anȱ
7 orderȱ subjectȱ toȱ judicialȱ review—butȱ onlyȱ ifȱ theȱ appellantsȱ hadȱ
8 continuedȱlitigatingȱbeforeȱtheȱSECȱALJȱandȱlostȱonȱtheȱmerits.5ȱȱȱ
9 Forcingȱ theȱ appellantsȱ toȱ awaitȱ aȱ finalȱ Commissionȱ orderȱ
10 beforeȱ theyȱ mayȱ assertȱ theirȱ constitutionalȱ claimȱ inȱ aȱ federalȱ courtȱ
11 meansȱthatȱbyȱtheȱtimeȱtheȱdayȱforȱjudicialȱreviewȱcomes,ȱtheyȱwillȱ
12 alreadyȱhaveȱsufferedȱtheȱinjuryȱthatȱtheyȱareȱattemptingȱtoȱprevent.ȱȱ
13 Theȱ majorityȱ findsȱ thatȱ theȱ “litigant’sȱ financialȱ andȱ emotionalȱ costsȱ
5 Given that the vast majority of all SEC administrative proceedings end in settlements rather than in actual decisions, it might well be that choosing to litigate is, in fact, equivalent to “betting the farm.” See Brian Mahoney, SEC Could Bring More Insider Trading Cases In-House, LAW360 (June 11, 2014), http://www.law360.com/articles/547183/sec-could-bring-more-insider-trading- cases-in-house (quoting Andrew Ceresney, the head of the SEC's Division of Enforcement, as explaining that the “vast majority of our cases settle,” and stating, “I will tell you that there have been a number of cases in recent months where we have threatened administrative proceedings, it was something we told the other side we were going to do and they settled”).
20ȱ 1 inȱ litigatingȱ theȱ initialȱ proceedingȱ areȱ simplyȱ theȱ priceȱ ofȱ
2 participatingȱinȱtheȱAmericanȱlegalȱsystem,”ȱMajorityȱOp.ȱatȱ22,ȱbutȱ
3 theȱissueȱisȱlessȱtheȱcostsȱandȱburdenȱofȱlitigationȱandȱmoreȱthatȱtheȱ
4 appellantsȱareȱchallengingȱtheȱveryȱexistenceȱofȱtheȱALJsȱasȱaȱpartȱofȱ
5 theȱ statutoryȱ scheme.ȱ ȱ Theȱ appellantsȱ seekȱ toȱ enjoinȱ theȱ SECȱ
6 proceedings,ȱbutȱbyȱtheȱtimeȱthatȱtheyȱaccessȱanyȱjudicialȱreview,ȱtheȱ
7 proceedingsȱwillȱbeȱcomplete,ȱrenderingȱtheȱpossibilityȱofȱobtainingȱ
8 anȱinjunctionȱmootȱevenȱifȱtheȱfinalȱCommissionȱorderȱisȱvacated.ȱȱInȱ
9 myȱ view,ȱ thisȱ diminishesȱ theȱ weightȱ ofȱ thisȱ factor,ȱ forȱ whileȱ thereȱ
10 mayȱ beȱ review,ȱ itȱ cannotȱ beȱ consideredȱ trulyȱ “meaningful”ȱ atȱ thatȱ
11 point.ȱȱȱ
12 Theȱmajorityȱcitesȱaȱnumberȱofȱdecisionsȱforȱtheȱprincipleȱthatȱ
13 “postȬproceedingȱ reliefȱ.ȱ.ȱ.ȱsufficesȱ toȱ vindicateȱ theȱ litigant’sȱ
14 constitutionalȱ claim,”ȱ Majorityȱ Op.ȱ atȱ 21–22,ȱ butȱ noneȱ involvesȱ anȱ
15 analysisȱ ofȱ theȱ “meaningfulȱ judicialȱ review”ȱ prongȱ ofȱ thisȱ test.ȱȱ
16 Germainȱ v.ȱ Connecticutȱ Nationalȱ Bank,ȱ 930ȱ F.2dȱ 1038,ȱ 1040ȱ (2dȱ Cir.ȱ
21ȱ 1 1991)ȱ involvedȱ anȱ interlocutoryȱ appealȱ ofȱ theȱ denialȱ ofȱ aȱ juryȱ trialȱ
2 demandȱ inȱ aȱ bankruptcyȱ proceedingȱ andȱ theȱ applicationȱ ofȱ theȱ
3 collateralȱ orderȱ doctrineȱ exceptionȱ thatȱ anȱ orderȱ beȱ “effectivelyȱ
4 unreviewableȱ onȱ appeal.”ȱ ȱ ȱ DȇIppolitoȱ v.ȱ Americanȱ Oilȱ Co.,ȱ 401ȱ F.2dȱ
5 764,ȱ 765ȱ (2dȱ Cir.ȱ 1968)ȱ addressedȱ theȱ questionȱ ofȱ whetherȱ anȱ orderȱ
6 byȱaȱdistrictȱcourtȱtransferringȱanȱantitrustȱactionȱtoȱanotherȱdistrictȱ
7 wasȱaȱ“finalȱjudgment”ȱunderȱ28ȱU.S.C.ȱ§ȱ1291.ȱȱInȱreȱalȬNashiri,ȱ791ȱ
8 F.3dȱ 71,ȱ 79ȱ (D.C.ȱ Cir.ȱ 2015),ȱ addressedȱ theȱ “irreparableȱ injury”ȱ testȱ
9 meritingȱ theȱ grantȱ ofȱ aȱ writȱ ofȱ mandamusȱ toȱ stopȱ aȱ militaryȱ
10 commissionȱtrial.ȱȱAndȱFTCȱv.ȱStandardȱOilȱCo.ȱofȱCalifornia,ȱ449ȱU.S.ȱ
11 232,ȱ244ȱ(1980)ȱconcernedȱwhetherȱtheȱissuanceȱofȱaȱcomplaintȱbyȱtheȱ
12 FederalȱTradeȱCommissionȱcausedȱ“irreparableȱinjury”ȱallowingȱforȱ
13 judicialȱreviewȱorȱwhetherȱfinalȱagencyȱactionȱwasȱnecessary.ȱ
14 Whenȱitȱcomesȱtoȱtheȱ“meaningfulȱjudicialȱreview”ȱfactor,ȱitȱisȱ
15 myȱ viewȱ thatȱ weȱ needȱ lookȱ noȱ furtherȱ thanȱ Freeȱ Enterpriseȱ itselfȱ toȱ
16 understandȱ thatȱ beingȱ forcedȱ toȱ undergoȱ anȱ allegedlyȱ
22ȱ 1 unconstitutionalȱ proceedingȱ mayȱ playȱ intoȱ theȱ analysisȱ ofȱ whetherȱ
2 judicialȱ reviewȱ isȱ “meaningful.”ȱ ȱ Theȱ Courtȱ inȱ Freeȱ Enterpriseȱ
3 identifiedȱ aȱ numberȱ ofȱ possibleȱ waysȱ thatȱ theȱ plaintiffsȱ inȱ thatȱ caseȱ
4 couldȱobtainȱreviewȱofȱtheirȱconstitutionalȱclaimsȱagainstȱtheȱboardȱ
5 (suchȱ asȱ “select[ing]ȱ andȱ challeng[ing]ȱ aȱ Boardȱ ruleȱ atȱ random”ȱ orȱ
6 “incur[ring]ȱ aȱ sanctionȱ (suchȱ asȱ aȱ sizableȱ fine)ȱ byȱ ignoringȱ Boardȱ
7 requestsȱ forȱ documentsȱ andȱ testimony,”ȱ 561ȱ U.S.ȱ atȱ 490);ȱ itȱ simplyȱ
8 decidedȱ thatȱ noneȱ ofȱ theȱ optionsȱ wereȱ reasonableȱ toȱ askȱ ofȱ theȱ
9 plaintiffsȱandȱthereforeȱnoneȱprovidedȱ“meaningful”ȱjudicialȱreview.ȱȱ
10 Id.ȱatȱ490–91.ȱȱȱ
11 Theȱ Supremeȱ Courtȱ inȱ Freeȱ Enterpriseȱ alsoȱ explainedȱ thatȱ theȱ
12 plaintiffsȱwereȱ“entitledȱtoȱdeclaratoryȱreliefȱsufficientȱtoȱensureȱthatȱ
13 theȱreportingȱrequirementsȱandȱauditingȱstandardsȱtoȱwhichȱtheyȱareȱ
14 subjectȱwillȱbeȱenforcedȱonlyȱbyȱaȱconstitutionalȱagencyȱaccountableȱtoȱtheȱ
15 Executive,”ȱandȱitȱallowedȱtheȱplaintiffsȱtoȱbringȱtheirȱclaimȱatȱaȱtimeȱ
16 whereȱnoȱadministrativeȱproceedingsȱhadȱyetȱbeenȱformallyȱbroughtȱ
23ȱ 1 againstȱthem.ȱȱ561ȱU.S.ȱatȱ513ȱ(emphasisȱadded).ȱȱThisȱsuggestsȱthatȱ
2 theȱSupremeȱCourtȱconsidersȱtheȱveryȱprocessȱofȱenforcementȱbyȱanȱ
3 unconstitutionalȱ bodyȱ toȱ beȱ anȱ injuryȱ thatȱ canȱ beȱ relevantȱ toȱ theȱ
4 determinationȱofȱwhetherȱpostȬproceedingȱreviewȱisȱ“meaningful.”ȱ
5 IV. Conclusionȱ
6 Forȱallȱtheseȱreasons,ȱIȱamȱunpersuadedȱthatȱtheȱ“meaningfulȱ
7 judicialȱ review”ȱ prongȱ hasȱ enoughȱ weightȱ toȱ overpowerȱ theȱ otherȱ
8 twoȱfactorsȱandȱresultȱinȱaȱfindingȱofȱnoȱjurisdiction.ȱȱTheȱotherȱtwoȱ
9 factorsȱ clearlyȱ mirrorȱ thoseȱ inȱ Freeȱ Enterprise,ȱ andȱ theȱ availableȱ
10 reviewȱ isȱ notȱ meaningfulȱ enoughȱ toȱ setȱ thoseȱ twoȱ factorsȱ aside.ȱȱ
11 Thus,ȱ theȱ Appointmentsȱ Clauseȱ challengeȱ hereȱ isȱ notȱ “ofȱ theȱ typeȱ
12 Congressȱintendedȱtoȱbeȱreviewedȱwithinȱth[e]ȱstatutoryȱstructure.”6ȱȱ
13 ThunderȱBasin,ȱ510ȱU.S.ȱatȱ212.ȱȱȱ
6 Since the purpose of the application of the Free Enterprise factors is to determine whether Congress intended to deprive district courts of subject-matter jurisdiction to hear pre- administrative-adjudication claims, it seems relevant that Congress continues to authorize the SEC to choose whether it will pursue violations before its ALJs in administrative proceedings or in the district court as civil actions. To permit those subject to SEC enforcement actions to challenge administrative proceedings in the district courts on the basis of constitutional challenges that have nothing to do with the expertise of the SEC or with factual matters relevant to their own particular circumstances would seem consistent with that Congressional intent.
24ȱ 1 ȱ
2 Iȱwouldȱreverseȱtheȱdecisionȱofȱtheȱdistrictȱcourtȱandȱremandȱ
3 forȱanȱadjudicationȱofȱtheȱmeritsȱofȱtheȱAppointmentsȱClauseȱclaim.ȱ
25ȱ
Related
Cite This Page — Counsel Stack
Tilton v. SEC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tilton-v-sec-ca2-2016.