Bebo v. Securities & Exchange Commission

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 15-1511

LAURIE A. BEBO,

Plaintiff-Appellant,

v.

SECURITIES AND EXCHANGE COMMISSION,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Eastern District of Wisconsin.

No. 15-C-3 — Rudolph T. Randa, Judge.

____________________

ARGUED JUNE 4, 2015 — DECIDED AUGUST 24, 2015

____________________

Before BAUER, ROVNER, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge. Plaintiff Laurie Bebo is the re-

spondent in a pending administrative enforcement proceed-

ing before the Securities and Exchange Commission. The

administrative law judge assigned to the case is expected to

issue an initial decision within the coming months. If the de-

cision is adverse to Bebo, she will have the right to file a peti-

tion for review with the SEC. The SEC will then have the

power either to adopt the ALJ’s initial decision as the final

2 No. 15-1511

decision of the agency or to grant the petition and conduct de

novo review. If the SEC’s final decision is adverse, Bebo will

then have the right under 15 U.S.C. § 78y(a)(1) to seek judi-

cial review either in this circuit or in the United States Court

of Appeals for the District of Columbia Circuit.

Rather than wait for a final decision in the administrative

enforcement proceeding and pursue review in the court of

appeals, Bebo filed suit in federal district court challenging

on constitutional grounds the authority of the SEC to con-

duct the proceeding. She invoked the district court’s federal

question jurisdiction under 28 U.S.C. § 1331. The district

court granted the SEC’s motion to dismiss for lack of subject

matter jurisdiction, holding that the administrative review

scheme established by Congress stripped it of jurisdiction to

hear this type of challenge.

We affirm. It is “fairly discernible” from the statute that

Congress intended plaintiffs in Bebo’s position “to proceed

exclusively through the statutory review scheme” set forth

in 15 U.S.C. § 78y. See Elgin v. Dep’t of Treasury, 567 U.S. —,

132 S. Ct. 2126, 2132–33 (2012). Although § 78y is not “an ex-

clusive route to review” for all types of constitutional chal-

lenges, the relevant factors identified by the Court in Free En-

terprise Fund v. Public Company Accounting Oversight Board,

561 U.S. 477, 489 (2010), do not adequately support Bebo’s

attempt to skip the administrative and judicial review pro-

cess here. Although Bebo’s suit can reasonably be character-

ized as “wholly collateral” to the statute’s review provisions

and outside the scope of the agency’s expertise, a finding of

preclusion does not foreclose all meaningful judicial review.

If aggrieved by the SEC’s final decision, Bebo will be able to

raise her constitutional claims in this circuit or in the D.C.

No. 15-1511 3

Circuit. Both courts are fully capable of addressing her

claims. And because she is already a respondent in a pend-

ing administrative proceeding, she would not have to “‘bet

the farm … by taking the violative action’ before ‘testing the

validity of the law.’” Id. at 490, quoting MedImmune, Inc. v.

Genentech, Inc., 549 U.S. 118, 129 (2007). Unlike the plaintiffs

in Free Enterprise Fund, Bebo can find meaningful review of

her claims under § 78y. As a result, she must pursue judicial

review in the manner prescribed by the statute.

I. Factual and Procedural Background

In December 2014 the SEC brought an administrative

cease-and-desist proceeding against plaintiff Laurie Bebo.

The order alleges that Bebo, the former CEO of Assisted Liv-

ing Concepts, Inc., violated federal securities laws by ma-

nipulating internal books and records, making false repre-

sentations to auditors, and making false disclosures to the

SEC. Bebo’s answer in the administrative enforcement pro-

ceeding asserts as affirmative defenses the same constitu-

tional claims, discussed below, that she asserts in this law-

suit.

The SEC designated an administrative law judge to con-

duct the proceeding. See 17 C.F.R. § 201.110. The hearing

took place over several weeks and was scheduled to con-

clude by June 19, 2015. As far as we know, the ALJ has not

yet issued an initial decision. See id., § 201.360.

If the ALJ issues an initial decision adverse to Bebo, she

may file with the SEC a petition to review the ALJ’s decision.

See id., § 201.410(a). The SEC could then adopt the ALJ’s de-

cision as the final decision of the agency or grant the petition

and conduct de novo review. See id., §§ 201.411(a)–(c),

4 No. 15-1511

201.452. Either way, if Bebo is aggrieved by the SEC’s final

decision, she will have the right to seek judicial review in

this court or in the D.C. Circuit. See 15 U.S.C. § 78y(a)(1).

Upon filing the record in the court of appeals, the court’s ju-

risdiction would become “exclusive,” and it would have the

power to “affirm or modify and enforce or to set aside the

order in whole or in part.” Id., § 78y(a)(3).

Rather than wait for the administrative process to end

and pursue judicial review as prescribed by § 78y, Bebo filed

suit in a federal district court alleging that the SEC lacks the

constitutional authority to continue the administrative pro-

ceeding because certain provisions of the Dodd-Frank Wall

Street Reform and Consumer Protection Act of 2010, Pub. L.

No. 111-203, 124 Stat. 1376, 1862–65 (2010) (“Dodd-Frank”),

are unconstitutional.

Prior to Dodd-Frank, if the SEC sought a monetary pen-

alty against a non-regulated individual like Bebo, it had to

file suit in federal district court. Section 929P(a) of Dodd-

Frank changed this by giving the SEC a choice of forums: it

can either proceed in federal district court or conduct its

own administrative enforcement proceeding. See 15 U.S.C.

§ 78u-2.

The SEC’s choice of forum has procedural consequences.

Administrative enforcement proceedings are governed by

the SEC’s Rules of Practice, not the Federal Rules of Evidence

and Civil Procedure. Accordingly, the respondent in an ad-

ministrative enforcement proceeding has fewer rights to dis-

covery than she would if the SEC had filed suit in district

court. She also has no right to a jury trial before the SEC.

No. 15-1511 5

Bebo contends that § 929P(a) of Dodd-Frank is facially

unconstitutional under the Fifth Amendment because it pro-

vides the SEC “unguided” authority to choose which re-

spondents will and which will not receive the procedural

protections of a federal district court, in violation of equal

protection and due process guarantees. She also contends

that the SEC’s administrative proceedings are unconstitu-

tional under Article II because the ALJs who preside over

SEC enforcement proceedings are protected from removal

by multiple layers of for-cause protection. This set-up vio-

lates Article II, Bebo argues, because it interferes with the

President’s obligation to ensure the faithful execution of the

laws. Cf. Free Enterprise Fund v. Public Company Accounting

Oversight Board, 561 U.S. 477, 483–84 (2010) (dual for-cause

limitations on removal of members of special oversight

board unconstitutional under Article II).

The district court dismissed the case for lack of subject

matter jurisdiction. Bebo v. SEC, No. 15-C-3, 2015 WL 905349

(E.D. Wis. Mar. 3, 2015). That decision was based on legal

determinations rather than factual ones, so we review that

decision de novo. E.g., Center for Dermatology & Skin Cancer,

Ltd. v. Burwell, 770 F.3d 586, 589 (7th Cir. 2014).

II. Analysis

The statutory issue here is a jurisdictional one: whether

the statutory judicial review process under 15 U.S.C. § 78y

bars district court jurisdiction over a constitutional challenge

to the SEC’s authority when the plaintiff is the respondent in

a pending enforcement proceeding. Where the statutory re-

view scheme does not foreclose all judicial review but mere-

ly directs that judicial review occur in a particular forum, as

in this case, the appropriate inquiry is whether it is “fairly

6 No. 15-1511

discernible” from the statute that Congress intended the

plaintiff “to proceed exclusively through the statutory re-

view scheme.” Elgin v. Dep’t of Treasury, 567 U.S. —, 132 S.

Ct. 2126, 2132–33 (2012).1

This inquiry is claim-specific. To find congressional in-

tent to limit district court jurisdiction, we must conclude that

the claims at issue “are of the type Congress intended to be

reviewed within th[e] statutory structure.” Free Enterprise

Fund, 561 U.S. at 489, quoting Thunder Basin Coal Co. v. Reich,

510 U.S. 200, 212 (1994). We examine the statute’s text, struc-

ture, and purpose. Elgin, 132 S. Ct. at 2133; see also Thunder

Basin Coal, 510 U.S. at 207.

The Supreme Court has already considered whether

Congress, by establishing a judicial review process in § 78y,

intended to foreclose judicial review in the district courts for

all types of claims involving the SEC. In Free Enterprise Fund

the Court held that § 78y does not strip district courts of ju-

risdiction to hear at least certain types of constitutional

claims. 561 U.S. at 489–91. Our focus in this appeal is wheth-

er Bebo’s case is sufficiently similar to Free Enterprise Fund to

allow her to bypass the ALJ and judicial review under § 78y.

Based on the Supreme Court’s further guidance in Elgin, we

believe the answer is no.

1 The inquiry is different when Congress has enacted a statute pur-

porting to deny all judicial review for constitutional claims. Then a

“heightened standard” applies, requiring a clear statement from Con-

gress that it intended to foreclose judicial review in any forum. See Elgin,

132 S. Ct. at 2132, discussing Webster v. Doe, 486 U.S. 592 (1988), and

Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994).

No. 15-1511 7

The Free Enterprise Fund plaintiffs were an accounting

firm and a nonprofit organization of which the firm was a

member. Unlike Bebo, neither plaintiff was subject to a pend-

ing enforcement action when they filed their complaint.

They brought suit in district court challenging the constitu-

tionality of the Sarbanes-Oxley Act of 2002 provisions estab-

lishing a special oversight board whose members were ap-

pointed by the SEC. The special oversight board had the

powers to inspect registered accounting firms, to initiate

formal investigations, and to impose sanctions in discipli-

nary proceedings. The board had inspected the plaintiff ac-

counting firm, released a report critical of the firm’s account-

ing practices, and then launched a formal investigation. Be-

fore the investigation was complete, the plaintiffs sued the

board and its members alleging that the statute was uncon-

stitutional under Article II because it conferred executive

power on board members without subjecting them to Presi-

dential control.

Before reaching the merits, the Court rejected the board’s

argument that § 78y provided an exclusive system for judi-

cial review of the plaintiffs’ claims. Applying the standard

established in Thunder Basin Coal, the Court explained that it

would not presume that Congress intended to strip district

courts of jurisdiction where (1) “a finding of preclusion

could foreclose all meaningful judicial review,” (2) the suit

was “wholly collateral to a statute’s review provisions,” and

(3) the plaintiffs’ claims were “outside the agency’s exper-

tise.” Free Enterprise Fund, 561 U.S. at 489 (internal quotation

marks omitted), citing Thunder Basin Coal, 510 U.S. at 212–13.

The Court concluded that all three factors weighed in favor

of finding jurisdiction in Free Enterprise Fund.

8 No. 15-1511

First, the Court explained, the plaintiffs would not be

able to receive meaningful judicial review without access to

the district courts. Because § 78y provides for judicial review

of final orders of the SEC and not every adverse action by

the board would be “encapsulated in a final Commission or-

der or rule,” plaintiffs would have been required either (1) to

seek SEC review of the board’s auditing standards, registra-

tion requirements, or other rules, or (2) to invite a sanction

from which to appeal by intentionally violating one of the

board’s rules or by ignoring a request for documents or tes-

timony. Id. at 490.

Neither option, the Court said, provided the plaintiffs

with meaningful judicial review. The first option was inade-

quate because the plaintiffs were not challenging any of the

auditing standards, registration requirements, or other rules.

Forcing plaintiffs “to select and challenge a Board rule at

random,” the Court explained, would have been “an odd

procedure for Congress to choose, especially because only

new rules, and not existing ones, are subject to challenge.”

Id., citing 15 U.S.C. §§ 78s(b)(2), 78y(a)(1), 7217(b)(4). The

second option was inadequate because courts “normally do

not require plaintiffs to ‘bet the farm … by taking the viola-

tive action’ before ‘testing the validity of the law.’” Id., quot-

ing MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 129

(2007), and citing Ex parte Young, 209 U.S. 123 (1908).

On the second factor, the Court concluded that the plain-

tiffs’ challenges were “wholly collateral” to the statute’s re-

view provisions. Because the plaintiffs were objecting “to the

Board’s existence” rather than to a specific rule or order by

the board, the claims were not of the type Congress intended

to funnel into the statutory review scheme. Id., citing McNary

No. 15-1511 9

v. Haitian Refugee Center, Inc., 498 U.S. 479, 491–92 (1991)

(Immigration and Nationality Act limited judicial review of

individual amnesty determinations to deportation or exclu-

sion proceedings but did not strip district courts of jurisdic-

tion to hear “general collateral challenges to unconstitutional

practices and policies used by the agency in processing ap-

plications” for lawful-admission status).

On the third and final factor, Free Enterprise Fund con-

cluded that the plaintiffs’ challenges fell outside the SEC’s

“competence and expertise.” Id. at 491. The plaintiffs’ claims

were “standard questions of administrative law” that did

not “require ‘technical considerations of [agency] policy.’”

Id., quoting Johnson v. Robison, 415 U.S. 361, 373 (1974). The

Court distinguished Thunder Basin Coal on the ground that

the plaintiff’s claims there raised issues that the agency had

“recently addressed” and with which it had “extensive expe-

rience.” Id., citing 510 U.S. at 214–15. The Court distin-

guished United States v. Ruzicka on the ground that even

though the claims there were “formulated in constitutional

terms,” they rested ultimately on fact-bound questions about

the specific industry regulated by the agency. Id., citing 329

U.S. 287, 294 (1946).

Read broadly, the jurisdictional portion of Free Enterprise

Fund seems to open the door for a plaintiff to gain access to

federal district courts by raising broad constitutional chal-

lenges to the authority of the agency where those challenges

(1) do not depend on the truth or falsity of the agency’s fac-

tual allegations against the plaintiff and (2) the plaintiff’s

claims do not implicate the agency’s expertise. That’a how

Bebo reads the case. She argues that Free Enterprise Fund con-

trols here because her complaint raises facial challenges to

10 No. 15-1511

the constitutionality of the enabling statute (§ 929P(a) of

Dodd-Frank) and to the structural authority of the agency

itself, and the merits of those claims do not depend on the

truth or falsity of the SEC’s factual claims against Bebo or

implicate the agency’s expertise. While Bebo’s position has

some force, we think the Supreme Court’s more recent dis-

cussion of these issues in the Elgin case undermines the

broader reading of the jurisdictional holding of Free Enter-

prise Fund.

In Elgin v. Dep’t of Treasury, 567 U.S. —, 132 S. Ct. 2126

(2012), federal competitive service employees were dis-

charged for failing to comply with the Military Selective Ser-

vice Act, 50 U.S.C. App. § 453. (Another federal statute, 5

U.S.C. § 3328, bars from employment by an executive agency

anyone who has knowingly and willfully failed to register.)

The plaintiffs challenged their terminations before the Merit

Systems Protection Board (MSPB) and lost. Instead of filing

an appeal in the Federal Circuit as prescribed by the Civil

Service Reform Act of 1978 (CSRA), id. § 7703(a)(1), (b)(1),

they filed suit in federal district court. They alleged that

§ 3328 was an unconstitutional bill of attainder and, when

combined with the male-only registration requirement of the

Military Selective Service Act, discriminated unconstitution-

ally on the basis of sex.

The Elgin plaintiffs relied, as Bebo does here, on Free En-

terprise Fund to establish jurisdiction in the district court and

to bypass the statutory route of administrative adjudication

followed by judicial review. They argued that the CSRA re-

view scheme was inadequate because (1) the MSPB lacked

authority to pass on the constitutionality of legislation, (2)

their claims were “wholly collateral” to the CSRA review

No. 15-1511 11

scheme because they were facial challenges to the constitu-

tionality of the statutes and did not depend on the factual

allegations against the plaintiffs, and (3) the agency had no

special expertise to address the merits of their claims. See

Elgin, 132 S. Ct. at 2136–40. The Court rejected each argu-

ment, concluding that it was “fairly discernible that the

CSRA review scheme was intended to preclude district court

jurisdiction” over the plaintiffs’ claims. Id. at 2140.

In reaching this conclusion, the Elgin Court specifically

rejected the plaintiffs’ argument, advanced by Bebo in this

appeal and by the dissent in Elgin, that facial constitutional

challenges automatically entitled the plaintiffs to seek judi-

cial review in the district court:

The dissent carves out for district court adjudi-

cation only facial constitutional challenges to

statutes, but we have previously stated that

“the distinction between facial and as-applied

challenges is not so well defined that it has

some automatic effect or that it must always

control the pleadings and disposition in every

case involving a constitutional challenge.” Citi-

zens United v. Federal Election Comm'n, 558 U.S.

310, 331 (2010). By contrast, a jurisdictional rule

based on the type of employee and adverse

agency action at issue does not involve such

amorphous distinctions. Accordingly, we con-

clude that the better interpretation of the CSRA

is that its exclusivity does not turn on the con-

stitutional nature of an employee’s claim, but

rather on the type of the employee and the

challenged employment action.

12 No. 15-1511

Id. at 2135–36.

The Elgin Court also read the jurisdictional portion of

Free Enterprise Fund narrowly, distinguishing it on grounds

directly relevant here. The Court began with the first Free En-

terprise Fund factor: whether the statutory review scheme

provided for meaningful judicial review of the plaintiffs’

claims. The Court assumed for the sake of argument that the

MSPB could not review the constitutionality of the chal-

lenged legislation but concluded that this inability did not

mean the statutory review system failed to provide mean-

ingful judicial review. Id. at 2136–37. Because the CSRA pro-

vided review in the Federal Circuit, “an Article III court fully

competent to adjudicate petitioners’ claims that Section 3328

and the Military Selective Service Act’s registration require-

ment are unconstitutional,” the statutory scheme provided

an opportunity for meaningful judicial review. Id. at 2137.

The Court also rejected the plaintiffs’ argument that the

CSRA did not provide for meaningful judicial review be-

cause the MSPB would not allow them to develop adequate-

ly the factual basis for their claims. The Court explained that

under the CSRA, the MSPB had the power to take evidence,

which was sufficient to provide meaningful judicial review:

“Unlike petitioners, we see nothing extraordinary in a statu-

tory scheme that vests reviewable factfinding authority in a

non-Article III entity that has jurisdiction over an action but

cannot finally decide the legal question to which the facts

pertain.” Id. at 2138.

Turning to the second Free Enterprise Fund factor, the El-

gin Court rejected the plaintiffs’ argument that the bill-of-

attainder and sex-discrimination claims were “wholly collat-

eral” to the type of personnel actions commonly adjudicated

No. 15-1511 13

by the MSPB. The Court explained that even if the claims

were not typical of day-to-day personnel cases frequently

decided by the MSPB, the plaintiffs’ constitutional claims

were merely “the vehicle by which they seek to reverse the

removal decisions, to return to federal employment, and to

receive the compensation they would have earned but for

the adverse employment action.” Id. at 2139–40 (emphasis

added). “A challenge to removal is precisely the type of per-

sonnel action regularly adjudicated by the MSPB and the

Federal Circuit within the CSRA scheme. Likewise, rein-

statement, backpay, and attorney’s fees are precisely the

kinds of relief that the CSRA empowers the MSPB and the

Federal Circuit to provide.” Id. at 2140.

Finally, the Elgin Court discussed the third Free Enterprise

Fund factor, whether the plaintiffs’ claims implicated the

agency’s expertise. Recognizing that no agency had special

expertise over bills of attainder or sex discrimination, the

Court explained that this way of looking at the issue missed

the point:

But petitioners overlook the many threshold

questions that may accompany a constitutional

claim and to which the MSPB can apply its ex-

pertise. Of particular relevance here, prelimi-

nary questions unique to the employment con-

text may obviate the need to address the con-

stitutional challenge. For example, petitioner

Henry Tucker asserts that his resignation

amounted to a constructive discharge. That is-

sue falls squarely within the MSPB’s expertise,

and its resolution against Tucker would avoid

the need to reach his constitutional claims. In

14 No. 15-1511

addition, the challenged statute may be one

that the MSPB regularly construes, and its

statutory interpretation could alleviate consti-

tutional concerns. 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 fed-

eral statute. The MSPB’s resolution of those

claims in the employee’s favor might fully dis-

pose of the case. Thus, because the MSPB’s ex-

pertise can otherwise be “brought to bear” on

employee appeals that challenge the constitu-

tionality of a statute, we see no reason to con-

clude that Congress intended to exempt such

claims from exclusive review before the MSPB

and the Federal Circuit.

Id., citing Thunder Basin Coal, 510 U.S. at 214–15.

Elgin established several key points that undermine Be-

bo’s effort to skip administrative adjudication and statutory

judicial review here. First, Elgin made clear that Bebo cannot

sue in district court under § 1331 merely because her claims

are facial constitutional challenges. Second, it established

that jurisdiction does not turn on whether the SEC has au-

thority to hold § 929P(a) of Dodd-Frank unconstitutional,

nor does it hinge on whether Bebo’s constitutional challenges

fall outside the agency’s expertise. Third, Elgin showed that

the ALJ’s and SEC’s fact-finding capacities, even if more lim-

ited than a federal district court’s, are sufficient for meaning-

ful judicial review. Finally, Elgin explained that the possibil-

ity that Bebo might prevail in the administrative proceeding

(and thereby avoid the need to raise her constitutional

No. 15-1511 15

claims in an Article III court) does not render the statutory

review scheme inadequate.

The remaining issue, though, is whether Bebo’s claims

are “wholly collateral” to the administrative review scheme.

Neither Elgin nor Free Enterprise Fund clearly defines the

meaning of “wholly collateral.” Cf. Elgin, 132 S. Ct. at 2144–

45 (Alito, J., dissenting) (disagreeing with majority that

plaintiffs’ claims were not wholly collateral to statutory re-

view scheme).

In deciding whether a claim is wholly collateral to the

statutory review scheme, should the court focus on the rela-

tionship between the merits of the constitutional claim and

the factual allegations against the plaintiff in the administra-

tive proceeding? Taking their cue from Free Enterprise Fund,

that’s how some courts have understood the phrase. See Hill

v. SEC, — F. Supp. 3d —, —, 2015 WL 4307088, at *9 (N.D.

Ga. 2015) (finding subject matter jurisdiction to hear claims

under Article I, Article II, and Seventh Amendment: “What

occurs at the administrative proceeding and the SEC’s con-

duct there is irrelevant to this proceeding which seeks to in-

validate the entire statutory scheme.”); Duka v. SEC, — F.

Supp. 3d —, —, 2015 WL 1943245, at *6 (S.D.N.Y. 2015) (find-

ing subject matter jurisdiction to hear claim under Article II:

“Similarly, Duka contends that her Administrative Proceed-

ing may not constitutionally take place, and she does not at-

tack any order that may be issued in her Administrative Pro-

ceeding relating to ‘the outcome of the SEC action.’”); Gupta

v. SEC, 796 F. Supp. 2d 503, 513 (S.D.N.Y. 2011) (finding sub-

ject matter jurisdiction to hear equal protection claim: “These

16 No. 15-1511

allegations … would state a claim even if Gupta were entire-

ly guilty of the charges made against him in the OIP.”).2

Or should the court focus on whether the constitutional

claims are being raised as a “vehicle” to challenge agency

action taken during an administrative proceeding? Taking

their cue from Elgin, that is how other courts, including the

district court here, have understood the phrase. See Tilton v.

SEC, No. 15-CV-2472(RA), 2015 WL 4006165, at *12 (S.D.N.Y.

June 30, 2015) (finding no subject matter jurisdiction to hear

claim under Article II: “Moreover, unlike in Free Enterprise,

where the petitioners’ claims were necessarily collateral to

any administrative review scheme because they were not

subject to an administrative proceeding at the time they filed

their action, Plaintiffs here are already within the review

mechanism. Their challenge therefore flows from the fact

that they are the subject of the proceeding that they seek to

enjoin, and any administrative ruling on their defense will

be appealable.”); Bebo v. SEC, No. 15-C-3, 2015 WL 905349, at

*2 (E.D. Wis. Mar. 3, 2015) (finding no subject matter jurisdic-

tion to hear claims under Fifth Amendment and Article II:

“This analogy is not enough to escape the clutches of § 78y

because in Free Enterprise, there was no Board action pending

against the petitioners when they brought suit in district

court.”).

2 Courts following this approach sometimes use the phrase “inextri-

cably intertwined” as shorthand for this way of analyzing the issue. See,

e.g., Heckler v. Ringer, 466 U.S. 602, 614 (1984) (“We agree with the Dis-

trict Court, however, that those claims are ‘inextricably intertwined’ with

respondents’ claims for benefits.”); Bodimetric Health Services, Inc. v. Aetna

Life & Cas., 903 F.2d 480, 483–84 (7th Cir. 1990).

No. 15-1511 17

Both approaches find some support in the Supreme

Court’s decisions. Compare Elgin, 132 S. Ct. at 2139–40, and

Weinberger v. Salfi, 422 U.S. 749, 764 (1975), which apply the

mechanism-of-review approach, with Free Enterprise Fund,

561 U.S. at 489–90, McNary v. Haitian Refugee Center, Inc., 498

U.S. 479, 492–93 (1991), Bowen v. City of New York, 476 U.S.

467, 483 (1986), Heckler v. Ringer, 466 U.S. 602, 617–18 (1984),

and Mathews v. Eldridge, 424 U.S. 319, 330–31 (1976), which

apply the relationship-of-claims approach. See also Thunder

Basin Coal, 510 U.S. at 212–13 (collecting cases but not defin-

ing “wholly collateral”).

At any rate, this unsettled issue does not affect the out-

come in this case. We think the most critical thread in the

case law is the first Free Enterprise Fund factor: whether the

plaintiff will be able to receive meaningful judicial review

without access to the district courts. The second and third

Free Enterprise Fund factors, although relevant to that deter-

mination, are not controlling, for the Supreme Court has

never said that any of them are sufficient conditions to bring

suit in federal district court under § 1331. We therefore as-

sume for purposes of argument that Bebo’s claims are “whol-

ly collateral” to the administrative review scheme. Even if

we give Bebo the benefit of that assumption, we think it is

“fairly discernible” that Congress intended Bebo to proceed

exclusively through the statutory review scheme established

by § 78y because that scheme provides for meaningful judi-

cial review in “an Article III court fully competent to adjudi-

cate petitioners’ claims.” See Elgin, 132 S. Ct. at 2137.

The key factor in Free Enterprise Fund that rendered § 78y

inadequate is missing here. To have her constitutional objec-

tions addressed, Bebo does not need to “select and challenge

18 No. 15-1511

a Board rule at random.” See Free Enterprise Fund, 561 U.S. at

490. Nor does she have to “‘bet the farm … by taking the vio-

lative action’ before ‘testing the validity of the law.’” See id.,

quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 129

(2007), and citing Ex parte Young, 209 U.S. 123 (1908). She is

already the respondent in a pending enforcement proceed-

ing, so she does not need to risk incurring a sanction volun-

tarily just to bring her constitutional challenges before a

court of competent jurisdiction. After the pending enforce-

ment action has run its course, she can raise her objections in

a circuit court of appeals established under Article III. The

first, and in our view most important, Free Enterprise Fund

factor weighs directly against her.3

Bebo’s counter to this way of synthesizing the cases is

that the administrative review scheme established by § 78y is

inadequate because, by the time she is able to seek judicial

review in a court of appeals, she will have already been sub-

jected to an unconstitutional proceeding. The Supreme Court

rejected this type of argument in FTC v. Standard Oil Co., 449

U.S. 232, 244 (1980), holding that the expense and disruption

of defending oneself in an administrative proceeding does

not automatically entitle a plaintiff to pursue judicial review

in the district courts, even when those costs are “substan-

tial.”

3McNary v. Haitian Refugee Center, Inc., 498 U.S. 479 (1991), is distin-

guishable on this basis as well. In McNary, there was no provision for

direct judicial review of the denial of lawful-admission status unless de-

portation proceedings were initiated. Thus, aliens could ensure judicial

review in a court of appeals only by voluntarily surrendering themselves

for deportation. “Quite obviously, that price is tantamount to a complete

denial of judicial review for most undocumented aliens.” Id. at 496–97.

No. 15-1511 19

This point is fundamental to administrative law. Every

person hoping to enjoin an ongoing administrative proceed-

ing could make this argument, yet courts consistently re-

quire plaintiffs to use the administrative review schemes es-

tablished by Congress. See Thunder Basin Coal, 510 U.S. at

216 (“Nothing in the language and structure of the Act or its

legislative history suggests that Congress intended to allow

mine operators to evade the statutory-review process by en-

joining the Secretary from commencing enforcement pro-

ceedings, as petitioner sought to do here.”); Sturm, Ruger &

Co. v. Chao, 300 F.3d 867, 876 (D.C. Cir. 2002) (“Our obliga-

tion to respect the review process established by Congress

bars us from permitting Sturm Ruger to make this end run,

and requires dismissal of its district court complaint.”);

USAA Federal Savings Bank v. McLaughlin, 849 F.2d 1505, 1510

(D.C. Cir. 1988) (“Where, as here, the ‘injury’ inflicted on the

party seeking review is the burden of going through an

agency proceeding, [Standard Oil Co.] teaches that the party

must patiently await the denouement of proceedings within

the Article II branch.”); Chau v. SEC, 72 F. Supp. 3d 417, 425

(S.D.N.Y. 2014) (“This Court’s jurisdiction is not an escape

hatch for litigants to delay or derail an administrative action

when statutory channels of review are entirely adequate.”).

It is only in the exceptional cases, such as Free Enterprise

Fund and McNary, where courts allow plaintiffs to avoid the

statutory review schemes prescribed by Congress. This is not

such a case.

We see no evidence from the statute’s text, structure, and

purpose that Congress intended for plaintiffs like Bebo who

are already subject to ongoing administrative enforcement

proceedings to be able to stop those proceedings by chal-

lenging the constitutionality of the enabling legislation or the

20 No. 15-1511

structural authority of the SEC. Unlike in Free Enterprise

Fund, meaningful judicial review is available to Bebo under

§ 78y because she does not have to assume the risk of a sanc-

tion before testing the validity of the law. If the SEC renders

an adverse final decision, judicial review awaits in the court

of appeals.

The district court’s judgment dismissing the case for lack

of subject matter jurisdiction is AFFIRMED.