Cochran v. SEC

Case: 19-10396 Document: 00516128227 Page: 1 Date Filed: 12/13/2021

United States Court of Appeals

for the Fifth Circuit United States Court of Appeals

Fifth Circuit

FILED

December 13, 2021

No. 19-10396

Lyle W. Cayce

Clerk

Michelle Cochran,

Plaintiff—Appellant,

versus

U.S. Securities and Exchange Commission; Gary

Gensler, in his official capacity as Chairman of the U.S. Securities and

Exchange Commission; Merrick Garland, U.S. Attorney General,

Defendants—Appellees.

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 4:19-CV-66

Before Owen, Chief Judge, and Jones, Smith, Stewart, Dennis,

Elrod, Southwick, Haynes, Graves, Higginson, Costa,

Willett, Duncan, Engelhardt, Oldham, and Wilson, Circuit

Judges. 1

1

Judge Ho is recused and did not participate in this decision.

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Haynes, Circuit Judge, joined by Jones, Smith, Elrod, Willett, 2

Duncan, Engelhardt, Oldham, and Wilson, Circuit Judges:

The question presented is whether a provision of the Securities

Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78y, implicitly strips

federal district courts of subject-matter jurisdiction to hear structural

constitutional claims. The district court held yes, and a panel of our court

affirmed. Rehearing the case en banc, we determine that the Exchange Act

does not disturb the district court’s jurisdiction over such claims.

Therefore, as explained below, we AFFIRM the district court’s

judgment in part, REVERSE in part, and REMAND for further

proceedings consistent with this opinion.

I. Background

In April 2016, the Securities and Exchange Commission (“SEC”)

brought an enforcement action against Michelle Cochran, a certified public

accountant. The SEC alleged that Cochran violated the Exchange Act by,

inter alia, failing to comply with auditing standards issued by the Public

Company Accounting Oversight Board (“PCAOB”) when performing

quarterly reviews and annual audits between 2010 and 2013. After a hearing,

an SEC administrative law judge (“ALJ”) ruled against Cochran, imposing a

$22,500 penalty and a five-year ban on practicing before the SEC. The SEC

adopted the ALJ’s decision. Cochran objected.

Before the SEC ruled on Cochran’s objection, the Supreme Court

intervened. In Lucia v. SEC, the Court held that SEC ALJs are officers of the

2

Judge Willett concurs in the judgment because he believes this case is

controlled by Free Enterprise Fund v. Public Co. Accounting Oversight Board, 561 U.S. 477,

489 (2010) (“[T]he text [of § 78y] does not expressly limit the jurisdiction that other

statutes confer on district courts. See, e.g., 28 U.S.C. §§ 1331, 2201.”).

2

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United States under the Appointments Clause, who must be appointed by

the President, a court of law, or a department head. 138 S. Ct. 2044, 2049,

2051 & n.3 (2018). Because the ALJ who had issued the initial decision in

Lucia had not been appointed by a person or entity in one of those three

categories (but had instead been appointed by SEC staff members), the Court

remanded the case to the SEC for further proceedings before a

constitutionally appointed ALJ. Id. at 2050, 2055.

In response to Lucia, the SEC remanded all pending administrative

cases for new proceedings before constitutionally appointed ALJs. 3

Cochran’s case was reassigned to a new ALJ.

Cochran filed suit in federal district court to enjoin the SEC’s

administrative enforcement proceedings against her. Though the SEC had

fixed the appointment problem Lucia addressed, Cochran contended it did

not fix a removability problem Lucia declined to reach: she alleged that,

because SEC ALJs enjoy multiple layers of “for-cause” removal protection,

they are unconstitutionally insulated from the President’s Article II removal

power. Cochran also asserted that the SEC violated her due process rights

by failing to adhere to its own rules and procedures.

The district court dismissed Cochran’s case for lack of subject-matter

jurisdiction, reasoning that because § 78y permits judicial review of final SEC

orders in the courts of appeals, the Exchange Act implicitly strips district

courts of jurisdiction to hear challenges to ongoing SEC enforcement

proceedings. In the district court’s view, Cochran was required to raise her

constitutional claims in the ALJ proceeding and then petition for review in

the Fifth Circuit or the District of Columbia Circuit if she was dissatisfied

3

The SEC had previously cured the constitutional defect identified in Lucia by

ratifying the appointment of all of its ALJs.

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with the outcome. Cochran timely appealed, and we enjoined the SEC

administrative proceedings pending appeal.

Subsequently, a panel of this court affirmed the district court’s

dismissal of Cochran’s claims for lack of jurisdiction. Cochran v. SEC,

969 F.3d 507, 511–18 (5th Cir. 2020). Although there was no disagreement

on the ultimate decision to affirm as to Cochran’s due process claim, the

panel reached a 2-1 decision affirming on the removal power claim. See id. at

518 & n.1 (Haynes, J., dissenting in part). We then granted rehearing en banc.

Cochran v. SEC, 978 F.3d 975 (5th Cir. 2020) (mem.).

II. Jurisdiction and Standard of Review

The sole issue on appeal is whether the district court had subject-

matter jurisdiction over Cochran’s claims. 4 Nevertheless, the district court

undoubtedly had “jurisdiction to determine its own jurisdiction.” United

States v. Ruiz, 536 U.S. 622, 628 (2002). We have appellate jurisdiction

under 28 U.S.C. § 1291. We review de novo a district court’s dismissal for

lack of subject-matter jurisdiction. Rothe Dev., Inc. v. U.S. Dep’t of Def.,

666 F.3d 336, 338 (5th Cir. 2011).

4

In her en banc briefing, Cochran does not argue that the district court erred by

dismissing her due process claim. At oral argument, however, Cochran’s counsel insisted

that Cochran had not abandoned that claim. It is well established that a litigant cannot

resuscitate an abandoned claim by raising it at oral argument. See United States v. Menesses,

962 F.2d 420, 425–26 (5th Cir. 1992) (holding that a litigant waived an argument by failing

to brief the issue, instead raising it for the first time at oral argument). Accordingly, we

conclude that Cochran has abandoned her due process claim and therefore affirm the

district court’s dismissal of it. See Coke v. Gen. Adjustment Bureau, 640 F.2d 584, 586 n.2

(5th Cir. Mar. 1981) (en banc) (“[The party] has not renewed this argument in his briefs to

the en banc court, and we therefore consider the argument to have been abandoned.”);

Justiss Oil Co. v. Kerr-McGee Refin. Corp., 75 F.3d 1057, 1067 (5th Cir. 1996) (explaining

that “[w]hen an appellant fails to advance arguments in the body of its brief in support of

an issue it has raised on appeal, we consider such issues abandoned”).

4

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III. Discussion

The SEC presents two bases for affirming the district court. First, the

SEC argues that Congress implicitly stripped district courts of jurisdiction to

hear structural constitutional claims under § 78y. Second, the SEC argues

that Cochran’s claims are not yet ripe. We discuss and reject each argument

in turn.

A. Implicit Jurisdiction Stripping

We first consider the text of § 78y. We conclude that it did not

explicitly or implicitly strip the district court of jurisdiction over Cochran’s

claim. We next consider Supreme Court precedent. The Supreme Court has

already rejected the SEC’s precise jurisdictional argument under § 78y, so we

do the same. Finally, we independently consider the so-called “Thunder

Basin factors.” We conclude those factors do not warrant departing from the

statutory text or deviating from the Supreme Court’s interpretation of § 78y.

1. Statutory Text

Congress gave federal district courts jurisdiction over “all civil actions

arising under the Constitution.” 28 U.S.C. § 1331 (emphasis added). Not

some or most—but all. It is undisputed that Cochran’s removal power claim

arises under the Constitution. Moreover, the Supreme Court has repeatedly

told us that “when a federal court has jurisdiction, it also has a ‘virtually

unflagging obligation . . . to exercise that authority.’” Mata v. Lynch,

576 U.S. 143, 150 (2015) (ellipsis in original) (quoting Colo. River Water

Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)); see, e.g.,

Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996) (“We have often

acknowledged that federal courts have a strict duty to exercise the

jurisdiction that is conferred upon them by Congress.”).

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It is true, however, that Congress can limit district court jurisdiction

if it so chooses. See Sheldon v. Sill, 49 U.S. 441, 449 (1850) (confirming

congressional control over lower federal court jurisdiction). The SEC argues

that Congress chose to limit district court jurisdiction by enacting § 78y.

That section provides, in relevant part:

A person aggrieved by a final order of the Commission entered

pursuant to this chapter may obtain review of the order in the

United States Court of Appeals for the circuit in which he

resides or has his principal place of business, or for the District

of Columbia Circuit, by filing in such court, within sixty days

after the entry of the order, a written petition requesting that

the order be modified or set aside in whole or in part.

15 U.S.C. § 78y(a)(1). By giving some jurisdiction to the courts of appeals,

the SEC argues, Congress implicitly stripped all jurisdiction from every other

court—including district courts’ jurisdiction over removal power claims

under § 1331.

In assessing the merits of this argument, “[w]e start, of course, with

the statutory text.” BP Am. Prod. Co. v. Burton, 549 U.S. 84, 91 (2006). See

generally Salinas v. U.S. R.R. Ret. Bd., 141 S. Ct. 691, 698 (2021) (noting that

there is a “strong presumption favoring judicial review of administrative

action” that the Government may rebut only by carrying the “‘heavy

burden’ of showing that the statute’s ‘language or structure’ forecloses

judicial review” (quoting Mach Mining, LLC v. EEOC, 575 U.S. 480, 486

(2015))). The text of § 78y conflicts with the SEC’s position in three ways.

First, § 78y provides that only “person[s] aggrieved by a final order of

the Commission” may petition in the relevant court of appeals to review that

final order. The statute says nothing about people, like Cochran, who have

not yet received a final order of the Commission. Nor does it say anything

about people, again like Cochran, who have claims that have nothing to do

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with any final order that the Commission might one day issue. Cochran’s

removal power claim challenges the constitution of the tribunal, not the

legality or illegality of its final order. Her injury has absolutely nothing

whatsoever to do with a final order, and therefore her claim falls outside of

§ 78y. 5

Second, § 78y(a)(1) is phrased in permissive terms. It says a person

aggrieved by a final order “may” petition for review in the court of appeals.

But it does not say that anyone “shall” or “shall not” do anything. It would

be troublingly counterintuitive to interpret § 78y(a)(1)’s permissive language

as eliminating alternative routes to federal court review, especially in the

context of separation-of-powers claims of the sort at issue here. See Burton,

549 U.S. at 91 (“[S]tatutory terms are generally interpreted in accordance

with their ordinary meaning.”); cf. Collins v. Yellen, 141 S. Ct. 1761, 1780

(2021) (explaining that, generally, “whenever a separation-of-powers

violation occurs, any aggrieved party with standing may file a constitutional

challenge” in federal court because “the separation of powers is designed to

preserve the liberty of all the people”).

Third, § 78y elsewhere uses mandatory terms—and they confirm our

understanding that Congress did not strip district courts of § 1331

5

Here’s a different way of saying the same thing. Imagine two different SEC

investigation targets, Jane and Sue. Jane thinks the SEC is investigating her unfairly and

that she’s innocent. Implicit jurisdiction stripping helps the SEC avoid judicial review of

Jane’s claims until after the completion of its enforcement proceeding and the issuance of

a final order. The SEC could argue, by giving Jane the right to challenge a final order in

§ 78y, Congress implicitly stripped Jane’s right to pre-enforcement review before the

issuance of a final order. But what about Sue? Sue is aggrieved by the fact that her ALJ is

unconstitutionally appointed. Section 78y cannot strip jurisdiction over Sue’s claims

because Sue is completely outside the statute from the word go. The only way for the SEC

to avoid judicial review of Sue’s claims is to say that Congress implicitly stripped review of

Jane’s claims and that implicitly also stripped review of Sue’s. It’s implicit stripping

squared.

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jurisdiction over structural constitutional claims. Under § 78y(a)(3),

jurisdiction “becomes exclusive” in the court of appeals only after (1) the

SEC issues a final order, (2) an aggrieved party files a petition, and (3) the

SEC submits its administrative record. The use of the word “exclusive” in

§ 78y(a)(3) shows that Congress knew how to strip jurisdiction when it

wanted to—and it only highlights that Congress did not strip § 1331

jurisdiction elsewhere. 6 Cf. Vaden v. Discover Bank, 556 U.S. 49, 59 n.9

(2009) (“[W]hen Congress wants to expand [federal-court] jurisdiction, it

knows how to do so clearly and unequivocally.” (second alteration in

original) (citation omitted)). The SEC’s contrary position would effectively

write § 78y(a)(3) out of the statute—there would be no point in making

jurisdiction “exclusive” in the court of appeals if no other court ever had

jurisdiction. We are loath to reach such a result. See Duncan v. Walker, 533

U.S. 167, 174 (2001) (noting that courts are “‘reluctan[t] to treat statutory

terms as surplusage’ in any setting” (alteration in original) (quoting Babbitt

v. Sweet Home Chapter of Cmtys. for a Great Or., 515 U.S. 687, 698 (1995))).

Consequently, the text of § 78y does not support the SEC’s position with

respect to Cochran’s removal power claim. 7

6

Similarly, the statute’s use of the linking verb “become” adds a temporal

element, telling us that the subject (“jurisdiction”) is only linked to the complement

(“exclusive”) after a petition is filed. In contrast, for example, the statute could have said

that jurisdiction “is exclusive,” or that the court of appeals “has exclusive jurisdiction.”

See, e.g., 15 U.S.C. § 717r(d)(1) (providing that “[t]he United States Court of

Appeals . . . shall have original and exclusive jurisdiction over any civil action for the review

of an order or action of a Federal agency”). But the use of “becomes” necessarily implies

a transformation.

7

Our holding is limited to the specific removal power claim at issue here; as this is

not a “mine-run” securities law case, we do not consider the question of whether the text

of the Exchange Act evinces an intent to strip district courts of jurisdiction over claims that

actually relate to a final SEC order.

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2. Free Enterprise Fund

Any doubts we might have were put to rest by the Supreme Court’s

decision in Free Enterprise Fund v. Public Co. Accounting Oversight Board, 561

U.S. 477 (2010). In Free Enterprise Fund, the Supreme Court rejected the

precise argument the SEC makes here—that the Exchange Act divests

district courts of jurisdiction over removal power challenges. See id. at 489.

Hence, Free Enterprise Fund is squarely on point, foreclosing any possibility

that § 78y strips district courts of jurisdiction over structural constitutional

challenges.

In Free Enterprise Fund, the PCAOB inspected an accounting firm,

issued a report criticizing its auditing practices, and opened a formal

investigation. Id. at 487. The accounting firm (and a nonprofit organization

it belonged to) then filed suit in federal district court, seeking a declaratory

judgment that the PCAOB was unconstitutionally structured, as well as an

injunction preventing the PCAOB from exercising its powers. Id. The

accounting firm argued that the PCAOB’s double for-cause removal

protection violated the President’s Article II removal power. Id. It also

asserted that the members of the PCAOB had not been properly appointed

under the Appointments Clause. Id. at 487–88. Just as it does now, the

Government maintained that § 78y deprived the district court of jurisdiction

to hear the accounting firm’s constitutional challenges. 8 Id. at 489.

The Supreme Court rejected the Government’s argument and held

“the text [of § 78y] does not expressly limit [district court]

jurisdiction . . . . Nor does it do so implicitly.” Id. In reaching that result, the

8

According to the Government, § 78y was relevant in Free Enterprise Fund because

the SEC had the power “to review any [PCAOB] rule or sanction”; thus, § 78y permitted

review of PCAOB actions that were ratified as final SEC orders. 561 U.S. at 489.

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Court explained that “we presume that Congress does not intend to limit

jurisdiction if [1] ‘a finding of preclusion could foreclose all meaningful

judicial review’; [2] if the suit is ‘wholly collateral to a statute’s review

provisions’; and [3] if the claims are ‘outside the agency’s expertise.’” Id.

(quoting Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 212–13 (1994) (laying

out these considerations, referred to as the “Thunder Basin factors”)).

First, the Court determined that the Government’s theory would

foreclose all meaningful judicial review because “[s]ection 78y provides only

for judicial review of [SEC] action, and not every [PCAOB] action is

encapsulated in a final [SEC] order or rule.” Id. at 490. The Court explained

that the PCAOB’s investigation of the accounting firm had not led to any

sanction and that the PCAOB’s critical inspection report was not subject to

judicial review. Id.

Second, the Court determined that the accounting firm’s challenge

was “collateral” to § 78y’s review provisions because it “object[ed] to the

[PCAOB]’s existence, not to any of its auditing standards.” Id. Thus, the

Court rejected the Government’s suggestion that the accounting firm could

have sought SEC review of a PCAOB rule or regulation, as such a challenge

would have been a pointless pretext for its structural constitutional claims.

Id. (noting that “[r]equiring petitioners to select and challenge a [PCAOB]

rule at random [would be] an odd procedure for Congress to choose”).

Finally, the Court held that the accounting firm’s constitutional

claims were outside the SEC’s expertise because they were “standard

questions of administrative law” that did not require any “fact-bound

inquiries” or “‘technical considerations of [agency] policy.’” Id. at 491

(alteration in original) (quoting Johnson v. Robinson, 415 U.S. 361, 373 (1974)).

Consequently, the Court concluded that § 78y did not deprive the district

court of jurisdiction over the accounting firm’s constitutional claims. Id.

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Just like Free Enterprise Fund, this case concerns the question of

whether the Exchange Act divests district courts of jurisdiction to consider

removal power challenges; every material aspect of the Supreme Court’s

reasoning in Free Enterprise Fund would seem to apply with equal force here.

Nevertheless, the SEC urges us to depart from Free Enterprise Fund, even

though that case involved the same statutory-review scheme and the same

type of constitutional claim.

The SEC primarily argues that Free Enterprise Fund is distinguishable

because, in that case, the PCAOB had not yet commenced an administrative

proceeding against the plaintiff accounting firm. Since Cochran is already in

the midst of an administrative proceeding, and that proceeding could

eventually result in a final SEC order that Cochran may challenge under

§ 78y, the SEC contends that she has a meaningful opportunity for judicial

review. Yet, this difference lacks meaning: although Cochran’s case is

farther along than in Free Enterprise Fund, she is still not guaranteed an

adverse final order, as the SEC might resolve her case in her favor. Hence,

just as in Free Enterprise Fund, it remains possible that Cochran will not be

able to obtain judicial review over her removal power claim unless the district

court hears it now. In short, Free Enterprise Fund still controls. 9

9

The dissenting opinion attempts to salvage the SEC’s “enforcement-

investigation distinction” on the basis that permitting district court jurisdiction over

challenges to pending enforcement proceedings would disrupt the statutory scheme. See

Dissenting Op. at 88 n.15. Of course, given the Supreme Court’s decision in Free Enterprise

Fund, the dissenting opinion is forced to concede that district court jurisdiction over

challenges to SEC investigations does not disrupt the statutory scheme. Id. Yet, the

dissenting opinion fails to point to anything in the text of the Exchange Act or in Free

Enterprise Fund that distinguishes between investigation and enforcement. Consequently,

we see no basis for supposing that permitting judicial review over ongoing SEC

enforcement proceedings would be more disruptive than judicial review over SEC

investigations.

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Nevertheless, the SEC asserts that other circuits have adopted its

view of Free Enterprise Fund and held that the Exchange Act strips district

courts of jurisdiction over structural constitutional claims. 10 But the other

circuits are not as unanimous as they appear, as their decisions have drawn

powerful dissents that largely support our position. See Tilton v. SEC, 824

F.3d 276, 292 (2d Cir. 2016) (Droney, J., dissenting) (“I conclude that Free

10

See Tilton v. SEC, 824 F.3d 276, 281–91 (2d Cir. 2016) (concluding that the

Exchange Act precluded district court jurisdiction over an Appointments Clause challenge

to an ongoing SEC proceeding); Bennett v. SEC, 844 F.3d 174, 186 (4th Cir. 2016)

(concluding that § 78y precluded district court jurisdiction over a removal power claim and

reasoning that Free Enterprise Fund did not control because the plaintiff was “already

embroiled in an enforcement proceeding”); Bebo v. SEC, 799 F.3d 765, 774–75 (7th Cir.

2015) (same); Hill v. SEC, 825 F.3d 1236, 1248, 1252 (11th Cir. 2016) (same); Jarkesy v.

SEC, 803 F.3d 9, 20, 30 (D.C. Cir. 2015) (holding that § 78y precluded district court

jurisdiction over various constitutional claims, including a nondelegation doctrine claim,

and determining that Free Enterprise Fund did not control because the plaintiff was “already

properly before the [SEC] by virtue of his alleged violations of [the securities] laws”); see

also Axon Enter., Inc. v. FTC, 986 F.3d 1173, 1182–83 (9th Cir. 2021) (holding that the

district court lacked jurisdiction to hear a pre-enforcement removal power challenge

regarding Federal Trade Commission ALJs and embracing the reasoning of Tilton, Bennett,

Bebo, Hill, and Jarkesy).

We note that several of the other circuits relied on their own precedents in

concluding that the plaintiffs’ claims were precluded. See Tilton, 824 F.3d at 285; Hill, 825

F.3d at 1248; Jarkesy, 803 F.3d at 19, 22, 24, 26, 29–30. It is likely that these courts were

required to follow their own prior decisions. See Christiansen v. Omnicom Grp., Inc., 852

F.3d 195, 199 (2d Cir. 2017) (per curiam) (explaining that the court is “bound by the

decisions of prior panels until such time as they are overruled either by an en banc panel of

our Court or by the Supreme Court” (quoting United States v. Wilkerson, 361 F.3d 717, 732

(2d Cir. 2004))); In re Burgest, 829 F.3d 1285, 1287 (11th Cir. 2016) (per curiam) (same);

United States v. Eshetu, 898 F.3d 36, 37 (D.C. Cir. 2018) (per curiam) (noting that “one

panel cannot overrule another”). By contrast, an en banc decision allows us to consider

again any prior precedents, although we do not have any that require a different outcome

here, as we explain. See United States v. Anderson, 885 F.2d 1248, 1255 (5th Cir. 1989) (en

banc) (noting that, when sitting en banc, we do not “hesitate[]” to overrule incorrect panel

decisions). Thus, we are free to focus exclusively on the Supreme Court’s precedents;

based on those precedents, we are bound to rule in Cochran’s favor, despite our reluctance

to disagree with our fellow circuits.

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Enterprise controls here.”); Axon Enter., Inc. v. FTC, 986 F.3d 1173, 1196 (9th

Cir. 2021) (Bumatay, J., concurring in part and dissenting in part) (addressing

a different statute and concluding, based on Free Enterprise Fund, “that all

three Thunder Basin factors—meaningful review, wholly collateral, and

agency expertise—favor[ed] district court jurisdiction” over the plaintiff’s

removal power claim). Moreover, the consensus view is not always correct.

See, e.g., Rehaif v. United States, 139 S. Ct. 2191, 2201 (2019) (Alito, J.,

dissenting) (noting that Rehaif rejected an interpretation of the relevant

statute that had “been adopted by every single Court of Appeals to address

the question”). So the SEC’s tallying of the circuits does not change our

conclusion.

The SEC also relies on Bank of Louisiana v. FDIC, where we discussed

the “ongoing proceeding” distinction in holding that the district court lacked

jurisdiction over a separation-of-powers challenge to an administrative

proceeding before the Federal Deposit Insurance Corporation (“FDIC”).

919 F.3d 916, 925–27, 930 (5th Cir. 2019). Critically, the statutory-review

scheme at issue in that case differed in a key respect from the Exchange Act’s:

in Bank of Louisiana, the scheme included an explicit statutory bar on any

court enjoining “the issuance or enforcement of any . . . [FDIC] order.” Id.

at 920 (quoting 12 U.S.C. § 1818(i)(1)). Accordingly, we held that district

court jurisdiction was explicitly divested. Id. at 924 (explaining that “the plain

terms of section 1818(i) bar jurisdiction here”). Although we proceeded to

analyze the Thunder Basin factors, we did so merely to “reinforce” our

conclusion based on the explicit jurisdictional bar. Id. at 925. Consequently,

we clarify that Bank of Louisiana was addressing the explicit statute at issue

there—not all statutes that may be questioned—and it does not mandate the

outcome here. Thus, the SEC’s effort to rely on Bank of Louisiana is

unconvincing.

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3. The Supreme Court’s Other Precedents

As stated above, Free Enterprise Fund is enough to decide this case.

However, because the SEC contends otherwise, we will proceed by assuming

arguendo that we cannot rely exclusively on Free Enterprise Fund and conduct

a further analysis using the so-called “Thunder Basin factors.” Before doing

so, it is necessary to review the Supreme Court’s two other major precedents

on implicit jurisdiction stripping, Thunder Basin itself and Elgin v. Department

of Treasury, 567 U.S. 1 (2012).

i. Thunder Basin

In Thunder Basin, the Supreme Court set forth the framework now

used to determine whether Congress implicitly precluded initial judicial

review by creating a statutory framework that delegates initial review to an

administrative agency. See 510 U.S. at 207. First, the Court considered

whether Congress’s intent to preclude district court jurisdiction was “fairly

discernible in the statutory scheme.” Id. (quoting Block v. Cmty. Nutrition

Inst., 467 U.S. 340, 351 (1984)). Then, it addressed whether the claims at

issue could “be afforded meaningful review” if the agency considered the

claims first. Id. To determine whether a claimant would receive meaningful

judicial review, the Court considered three factors: (1) whether “a finding of

preclusion could foreclose all meaningful judicial review”; (2) whether the

claims were “‘wholly “collateral”’ to a statute’s review provisions”; and

(3) whether the claims were “outside the agency’s expertise.” Id. at 212–13

(quoting Heckler v. Ringer, 466 U.S. 602, 618 (1984)).

Then the Court applied that framework to the Federal Mine Safety

and Health Amendments Act of 1977 (the “Mine Act”), 30 U.S.C. §§ 811–

26. Like the Exchange Act, the Mine Act provides a detailed statutory

scheme for review of administrative orders. In particular, mine operators are

able to challenge adverse orders before the Federal Mine Safety and Health

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Review Commission (the “Mine Commission”). Thunder Basin, 510 U.S. at

207 (citing 30 U.S.C. § 815(a) and (d)). Such challenges are heard before an

ALJ. Id. at 207–08. The Mine Commission may review the ALJ’s decision

or simply permit it to become the Commission’s final order. Id. at 208 n.9.

Aggrieved persons may appeal adverse Mine Commission decisions to a

court of appeals. Id. at 208 (citing 30 U.S.C. § 816(a)(1)–(2)). Like the SEC

in this case, the Department of Labor argued that the Mine Act’s review

scheme prevented district courts from exercising subject-matter jurisdiction

over pre-final decision challenges to the Mine Act. Id. at 202.

The Supreme Court held that the Mine Act’s detailed statutory

scheme evidenced Congress’s intent to preclude district court jurisdiction

over pre-enforcement challenges. Id. at 207–10. Further, the Court

determined that the Mine Commission had exclusive original jurisdiction

over claims like the plaintiff mine operator’s National Labor Relations Act

(“NLRA”) and due process claims. Id. at 216. Although the Mine

Commission had no particular experience with the NLRA, the mine

operator’s claims were ultimately about interpretation of the Mine Act’s

posting requirement. Id. at 214–15. That is, the mine operator’s NLRA

challenge was not “wholly collateral” to the provisions of the Mine Act and

was actually “squarely within the Commission’s expertise.” Id. at 212, 214.

Further, even if the operator’s constitutional claim was “beyond” the Mine

Commission’s jurisdiction, the operator’s “statutory and constitutional

claims . . . [could] be meaningfully addressed in the Court of Appeals.” Id.

at 215 (citation omitted).

Finally, the Court held that the mine operator had a meaningful

opportunity for judicial review of its claims. Id. at 216–18. The Court

determined that compliance with the posting requirement would not be

overly burdensome for the mine operator because the operator’s fear that its

NLRA rights would be violated was “speculative” and any such violation

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could be separately remedied. Id. Further, despite the fact that the Mine

Act’s penalties were “onerous,” the Court concluded that they did not have

the “practical effect” of “foreclos[ing] all access to the courts” because they

would not become “final and payable” until after appellate review. Id. at 218.

Thus, the mine operator did not face “a constitutionally intolerable choice.”

Id. Consequently, the Court held that the Mine Act was intended to preclude

district court review of the mine operator’s claims and that those claims

could be meaningfully reviewed. Id.

ii. Elgin

Decided two years after Free Enterprise Fund, Elgin is the Supreme

Court’s most recent application of the Thunder Basin factors. Although the

case further illustrated the framework, it did not break new ground.

In Elgin, the Supreme Court considered whether the Civil Service

Reform Act of 1978 (“CSRA”), Pub. L. No. 95-454, 92 Stat. 1111, “provides

the exclusive avenue to judicial review when a qualifying employee

challenges an adverse employment action by arguing that a federal statute is

unconstitutional.” 567 U.S. at 5. Just as it did in Free Enterprise Fund, the

Elgin Court applied the Thunder Basin factors.

First, the Elgin Court held that the CSRA’s “elaborate” statutory-

review scheme evidenced Congress’s intent to foreclose district court

jurisdiction. Id. at 10–13. Next, the Court rejected the plaintiff-employees’

argument that the Thunder Basin factors indicated that their claims were not

the type Congress intended to be reviewed through the CSRA. Id. at 15–16.

The Court concluded that the CSRA offered the plaintiffs meaningful review

of their claims because the Federal Circuit was “fully competent to

adjudicate [those] claims” on appeal. Id. at 17. Then the Court held that the

plaintiffs’ claims were not “wholly collateral” to the CSRA’s statutory-

review scheme because these claims were “the vehicle by which [plaintiffs]

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seek to reverse the removal decisions,” and the CSRA scheme was designed

to process removal challenges. Id. at 21–22. Finally, the Court determined

that the Merit Systems Protection Board (“MSPB”)’s expertise was still

relevant because there were many “preliminary questions unique to the

employment context [that could] obviate the need to address the

constitutional challenge.” Id. at 22–23. Consequently, the Court ruled that

“the CSRA review scheme was intended to preclude district court

jurisdiction over [the employees’] claims.” Id. at 23.

iii. Application of the Thunder Basin Factors

We follow Free Enterprise Fund in breaking the Thunder Basin analysis

down into two steps: first, whether a “‘statutory scheme’ displays a ‘fairly

discernible’ intent to limit jurisdiction,” and second, whether “the claims at

issue ‘are of the type Congress intended to be reviewed within th[e] statutory

structure.’” 561 U.S. at 489 (quoting Thunder Basin, 510 U.S. at 207, 212).

At step two, “we presume that Congress does not intend to limit jurisdiction

if [1] ‘a finding of preclusion could foreclose all meaningful judicial review’;

[2] if the suit is ‘wholly collateral to a statute’s review provisions’; and [3] if

the claims are ‘outside the agency’s expertise.’” 11 Id.

11

At no point did the Elgin Court say or suggest that it was changing the Thunder

Basin inquiry or overruling all or part of Free Enterprise Fund, which is yet another reason

we remain bound by Free Enterprise Fund. We “should not lightly assume that a prior

decision has been overruled sub silentio merely because its reasoning and result appear

inconsistent with later cases.” Williams v. Whitley, 994 F.2d 226, 235 (5th Cir. 1993). As

between the directly on-point decision (Free Enterprise Fund) and some other decision

(Elgin), we must follow the former—even if we think it is inconsistent with the latter: “We

reaffirm that ‘[i]f a precedent of this Court has direct application in a case, yet appears to

rest on reasons rejected in some other line of decisions,’ the Court of Appeals should follow

the case which directly controls, leaving to this Court the prerogative of overruling its own

decisions.” Agostini v. Felton, 521 U.S. 203, 237 (1997) (emphasis added) (quoting

Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989)); see also

Bryan A. Garner et al., The Law of Judicial Precedent 302 (2016).

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Assuming arguendo that Congress intended § 78y to have a

jurisdiction-stripping effect as to some securities-law claims, we advance to

step two and hold that Cochran’s removal power claim is not the type of

claim Congress intended to funnel through the Exchange Act’s statutory-

review scheme. Our conclusion is supported by the “wholly collateral,”

“agency expertise,” and “meaningful judicial review” Thunder Basin

factors.

First, Cochran’s removal power claim is wholly collateral to the

Exchange Act’s statutory-review scheme. Elgin suggests that whether a

claim is collateral to the relevant statutory-review scheme depends on

whether that scheme is intended to provide the sort of relief sought by the

plaintiff. 567 U.S. at 22 (ruling that the employees’ claims were not “wholly

collateral to the CSRA scheme” because they were “requesting relief that

the CSRA routinely affords”). This rule accords with Thunder Basin:

although the mine operator in that case brought claims under the NLRA and

the Constitution, it ultimately sought to avoid compliance with the Mine

Act’s posting requirement. 510 U.S. at 205, 213–14. By contrast, the Free

Enterprise Fund accounting firm did not seek relief of the sort the Exchange

Act’s scheme is designed to offer; rather than seeking to challenge the

propriety of any particular rule or regulation, or to establish that it was not

liable for a violation, the accounting firm sought to abolish the PCAOB. 561

U.S. at 490 (explaining that the plaintiffs “object[ed] to the [PCAOB]’s

existence”). That is, the accounting firm’s claims were structural

Indeed, even if the tension between the two cases was so stark that we could confidently

predict Free Enterprise Fund’s impending demise, we would still have to follow it—it is the

Supreme Court’s “prerogative alone to overrule one of its precedents.” State Oil Co. v.

Khan, 522 U.S. 3, 20 (1997).

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constitutional claims, rather than substantive securities claims, and were

therefore beyond the bounds of the Exchange Act’s statutory-review scheme.

As in Free Enterprise Fund, Cochran challenges the existence of SEC

ALJs. The nature of her challenge is structural—it does not depend on the

validity of any substantive aspect of the Exchange Act, nor of any SEC rule,

regulation, or order. Indeed, she is challenging the Exchange Act’s statutory-

review scheme itself. Contra Thunder Basin, 510 U.S. at 218 n.22 (noting that

the mine operator “expressly disavow[ed] any abstract challenge to the Mine

Act’s statutory review scheme”). Further, the outcome of her constitutional

challenge to the ALJs’ removal protection will have no bearing on her

ultimate liability for allegedly violating the securities laws. Consequently, she

does not seek relief of the sort the Exchange Act’s scheme is designed to

provide, meaning that the “wholly collateral” factor weighs against

preclusion.

Second, Cochran’s removal power claim is outside the SEC’s

expertise. As in Free Enterprise Fund, there is no doubt that Cochran’s claim

presents only “standard questions of administrative law, which the courts are

at no disadvantage in answering.” 561 U.S. at 491. For example, her claim

does not depend on a special understanding of the securities industry. Contra

Thunder Basin, 510 U.S. at 214–15 (determining that the mine operator’s

NLRA challenge was within the Mine Commission’s expertise because it

rested on interpretation of the Mine Act’s posting requirement). Nor is there

any suggestion that the SEC is an experienced adjudicator of structural

constitutional issues. See Carr v. Saul, 141 S. Ct. 1352, 1360 (2021) (noting

that “agency adjudications are generally ill suited to address structural

constitutional challenges, which usually fall outside the adjudicators’ areas

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of technical expertise”). Thus, the “agency expertise” factor also weighs

against preclusion. 12

Third, the Exchange Act’s statutory-review scheme threatens to

deprive Cochran of the opportunity for meaningful judicial review. Thunder

Basin and Elgin both held that even if the agency was incapable of

adjudicating a constitutional claim, meaningful judicial review was still

available in the court of appeals. Thunder Basin, 510 U.S. at 215; Elgin, 567

U.S. at 17. Yet this rule cannot be absolute: even though § 78y similarly

provides for eventual court of appeals review, in Free Enterprise Fund, the

Supreme Court held that the accounting firm “could [not] meaningfully

pursue [its] constitutional claims.” 561 U.S. at 490. The key question is why

Free Enterprise Fund had an outcome different from those in Thunder Basin

and Elgin.

The answer is that the Thunder Basin and Elgin plaintiffs sought

substantive relief, while the Free Enterprise Fund accounting firm sought

12

Elgin is not to the contrary. There, the Court held that the employees’

constitutional challenge was not outside the expertise of the MSPB because there were non-

constitutional “threshold questions” that, once resolved, could “obviate the need to

address the constitutional challenge.” Elgin, 567 U.S. at 22–23. Here, the SEC might

similarly resolve the administrative proceedings in Cochran’s favor on a threshold

securities-law issue, rather than on the basis of her removal power challenge. But Cochran

is not similarly situated to the Elgin plaintiffs because she asserts that she will be harmed

by the very act of having to appear in proceedings before an ALJ who is unconstitutionally

insulated from the President’s removal power. Therefore, if the SEC were to decide

Cochran’s case in her favor on other grounds, it would be denying her any opportunity for

meaningful judicial review of her alleged source of harm. By contrast, in Elgin, the MSPB

could meaningfully review the employees’ source of harm—their terminations—without

reaching their constitutional challenges. Id. Consequently, Elgin does not alter our analysis

based on Free Enterprise Fund. See Axon Enter., 986 F.3d at 1186 (concluding that the

Federal Trade Commission lacked the expertise to adjudicate a removal power challenge

to its ALJs and explaining that Elgin “does not establish a broad rule that an agency can

always moot a claim by simply ruling for the party”).

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structural relief: while the mine operator in Thunder Basin ultimately desired

to avoid potential harm from third parties (the miners), 510 U.S. at 215, the

accounting firm in Free Enterprise Fund asserted that it was harmed by being

investigated by a constitutionally illegitimate agency, 561 U.S. at 490.

That is, the accounting firm in Free Enterprise Fund asserted that it was

harmed by the structure of the Exchange Act’s statutory-review scheme

itself. By contrast, in Thunder Basin, the Court determined that the mine

operator would face only “speculative” harm if it complied with the Mine

Act’s statutory-review scheme. 510 U.S. at 216–17. As for Elgin, if the MSPB

had granted those plaintiffs the substantive relief they sought—

reinstatement, backpay, and attorney’s fees—their harm would have been

fully redressed, and they would have had no basis to seek further review in

the court of appeals. 567 U.S. at 22. Accordingly, the structural nature of

the accounting firm’s claim explains the different results in Free Enterprise

Fund on the one hand and Thunder Basin and Elgin on the other.

To put it plainly: Free Enterprise Fund held that § 78y does not provide

an adequate possibility of meaningful judicial review for challenges to the

structure of the Exchange Act’s statutory-review scheme. Like the

accounting firm in Free Enterprise Fund, Cochran is challenging the

constitutional authority of her adjudicator. The Exchange Act’s statutory-

review scheme does not guarantee Cochran meaningful judicial review of her

claim because the enforcement proceedings will not necessarily result in a

final adverse order; as a final adverse order is a prerequisite for judicial review

under § 78y(a)(1), Cochran may thus be left unable to seek redress for the

injury of having to appear before the SEC. Consequently, “a finding of

preclusion could foreclose all meaningful judicial review.” Free Enter. Fund,

561 U.S. at 489 (quoting Thunder Basin, 510 U.S. at 212–13). Therefore, Free

Enterprise Fund itself as well as all three Thunder Basin factors indicate that

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we should presume that Congress did not intend to preclude district court

jurisdiction over Cochran’s removal power claim. 13

The SEC contends Cochran’s alleged harm is not irreparable, so it

urges us to disregard the possibility that Cochran may never get her day in

court. On this point, the SEC relies on FTC v. Standard Oil Co. of California,

in which the Supreme Court ordered the dismissal of a collateral attack on an

administrative enforcement proceeding before the Federal Trade

Commission (“FTC”). 449 U.S. 232, 234–37, 247 (1980). There, the Court

strongly rebuffed the plaintiff’s argument that it would suffer irreparable

harm if forced to undergo the administrative proceedings because “[m]ere

litigation expense, even substantial and unrecoupable cost, does not

constitute irreparable injury.” Id. at 244 (quoting Renegotiation Bd. v.

Bannercraft Clothing Co., 415 U.S. 1, 24 (1974)); see also id. (further explaining

that “the expense and annoyance of litigation is ‘part of the social burden of

living under government’” (quoting Petroleum Expl., Inc. v. Pub. Serv.

Comm’n, 304 U.S. 209, 222 (1938))).

13

Contrary to the SEC’s protestations, the Thunder Basin factors do not lend any

credibility to its argument that we should not follow Free Enterprise Fund because Cochran

is involved in an ongoing administrative enforcement proceeding. At bottom, the SEC’s

proffered distinction between pre- and para-enforcement challenges fails to explain the

implied preclusion holding in Thunder Basin. In that case, the mine operator sought an

injunction prior to any adverse order from the Secretary of Labor, meaning that there were

no ongoing proceedings at the time the case was filed. Thunder Basin, 510 U.S. at 205. If

the SEC’s interpretation of Free Enterprise Fund was right, then the operator in Thunder

Basin should have been able to proceed with at least its constitutional claims in federal

district court. But the Court barred the operator from proceeding with any of its claims.

Id. Hence, the rule the SEC is apparently proposing—that district court jurisdiction is

precluded once administrative proceedings begin but is not precluded prior to the initiation

of such proceedings—is untenable. By contrast, our analysis above—focusing on the relief

sought by the plaintiff—squares all three of the Supreme Court’s major precedents.

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By contrast, Cochran challenges the entire legitimacy of her

proceedings, not simply the cost and annoyance. Nevertheless, even

assuming arguendo that Cochran’s alleged harm is “mere litigation

expense,” we find this argument unpersuasive. Standard Oil did not concern

implied jurisdiction stripping; rather, the issue before the Court was whether

the FTC had taken a “final agency action” within the meaning of the

Administrative Procedure Act (“APA”), 5 U.S.C. § 704. 449 U.S. at 233,

238. Consequently, Standard Oil is irrelevant to our inquiry. 14

Further, although the threat of irreparable harm may justify pre-

enforcement judicial review under principles of equity, see Ex parte Young,

209 U.S. 123, 145–48 (1908), irreparable harm is not ordinarily required to

invoke a district court’s general § 1331 federal question jurisdiction. As the

SEC seems to concede, the Thunder Basin inquiry offers the only possible

path to determining that Cochran cannot rely on § 1331; on that inquiry, the

SEC loses so long as “a finding of preclusion could foreclose all meaningful

judicial review”—no irreparable harm is required. Free Enter. Fund, 561 U.S.

at 489 (emphasis added) (quoting Thunder Basin, 510 U.S. at 212–13). It

seems plain that if a plaintiff ends up without any avenue to having her claim

heard by a court, judicial review is foreclosed, regardless of whether the harm

she suffers is truly irreparable (as Cochran contends it is). To be sure, it is

14

We take no position regarding Standard Oil’s relevance to the questions of

(1) whether Cochran may rely on the APA’s cause of action; and (2) whether she is entitled

to a preliminary injunction. See 5 U.S.C. § 704 (limiting judicial review under the APA to

“[a]gency action made reviewable by statute and final agency action for which there is no

other adequate remedy in a court”); Janvey v. Alguire, 647 F.3d 585, 595 (5th Cir. 2011)

(noting that to obtain a preliminary injunction, a plaintiff “must establish . . . a substantial

threat of irreparable injury if the injunction is not issued” (quoting Byrum v. Landreth, 566

F.3d 442, 445 (5th Cir. 2009)); cf. Free Enter. Fund, 561 U.S. at 508, 513 (holding that the

PCAOB’s structure violated the Constitution, but nevertheless concluding that the

plaintiffs were not entitled to injunctive relief).

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possible that Cochran could ultimately wind her way through enforcement

proceedings and get some later chance at judicial review 15—but it is also

possible that she could never have that opportunity, and that is enough to

preserve district court jurisdiction. 16

15

At least one individual has successfully followed this path. See Pet. for Review,

Jarkesy v. SEC, No. 20-61007 (5th Cir. Nov. 2, 2020). In addition to Jarkesy, the dissenting

opinion cites three other cases in which litigants were able to raise separation-of-powers

claims in federal court after undergoing administrative proceedings. Dissenting Op. at 81–

82 (citing Lucia, 138 S. Ct. at 2049–50, NLRB v. Noel Canning, 573 U.S. 513, 520–21 (2014),

and Carr, 141 S. Ct. at 1356–58, 1362). But the fact that only a handful of litigants have

been successful in navigating the administrative process demonstrates how difficult that

process is—these cases are the exceptions that prove the rule, so to speak. Cf. Adam M.

Katz, Eventual Judicial Review, 118 Colum. L. Rev. 1139, 1153 (2018) (explaining that

because the SEC wins the “vast majority” of the cases it brings through administrative

proceedings, “the incentive to settle SEC enforcement actions is therefore paramount,

making it, practically speaking, extremely unlikely for defendants to . . . have the

opportunity to appear before a federal court”). It is the likelihood of success for the many

that concerns us; the question is whether delaying Cochran’s claims will deny her

meaningful judicial review, not any possibility of judicial review. Consequently, the cases

relied on by the dissenting opinion do not support affirmance.

16

The dissenting opinion asserts that, because cases like Lucia and Carr have

recognized a meaningful opportunity to bring post-enforcement Appointments Clause

challenges, and the injury Cochran would suffer from an enforcement proceeding presided

over by an unconstitutionally insulated ALJ is supposedly less “serious” than the injury

caused by an enforcement proceeding presided over by an unconstitutionally appointed

ALJ, Cochran must have a meaningful opportunity for post-enforcement judicial review of

her claim. Dissenting Op. at 83–84. In making this curious argument, the dissenting

opinion relies solely on the Supreme Court’s recent decision in Collins, which held that the

Director of the Federal Housing Finance Agency was unconstitutionally insulated from the

President’s removal power, but that this constitutional defect did not render the Director’s

acts “void.” 141 S. Ct. at 1787.

Collins does not impact our conclusion in this case because Cochran does not seek

to “void” the acts of any SEC official. Rather, she seeks an administrative adjudication

untainted by separation-of-powers violations. Although we will not engage in the

dissenting opinion’s efforts to weigh the relative severity of constitutional injuries,

Cochran’s injury is sufficiently serious to justify pre-enforcement review in federal court.

Moreover, the dissenting opinion seems to imply that, because a removal power

violation does not render an improperly insulated official’s acts void, Cochran would not

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The SEC’s final fallback position—that other statutory schemes will

be threatened if we permit structural challenges to the Exchange Act to be

brought in district court—fares no better. Specifically, the SEC asserts that

there are many administrative schemes similar to the Exchange Act’s and

that these schemes are equally vulnerable to separation-of-powers

challenges. Consequently, the SEC contends, if we carve out structural

challenges from what it views as the general rule of implied preclusion,

“every person hoping to enjoin an administrative proceeding [will be able to]

sue in district court to allege that the proceedings were unconstitutional,”

wreaking havoc across the Government’s operations. This is a “policy

consideration[] more properly addressed to Congress than to this Court.”

Reiter v. Sonotone Corp., 442 U.S. 330, 345 (1979). Such a consideration

surely “cannot govern our reading of the plain language” of § 1331 and § 78y.

Id.

In any event, there are four reasons that the approach we take today is

unlikely to be as disruptive as the SEC fears. First, this case presents only

the issue of whether the Exchange Act divested district court jurisdiction

over claims that SEC ALJs are unconstitutionally insulated from the

President’s removal power; our holding extends no further, and the result in

other cases, even those concerning similar statutory schemes and claims, may

be different. 17 Second, even if Congress did not divest jurisdiction, other

be entitled to any relief on post-enforcement review even if she prevailed on her removal

power claim. See Dissenting Op. at 84. If it were true that Cochran could not obtain any

post-enforcement relief, then Cochran’s only hope for meaningful judicial review would be

through the present lawsuit. Therefore, even under the dissenting opinion’s view,

Cochran’s removal power claim was properly before the district court.

17

The dissenting opinion asserts that we “make[] no effort” to delineate between

structural constitutional claims that go beyond the Exchange Act’s statutory-review

scheme and substantive securities claims that do not. See Dissenting Op. at 86 n.14. But it

is unnecessary to delineate between the two because our limited holding applies only to the

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doctrines, such as standing, ripeness, exhaustion, sovereign immunity, and

abstention, may prevent district courts from hearing challenges to ongoing

administrative enforcement proceedings. Third, to actually prevail on their

claims, plaintiffs must demonstrate that their arguments are meritorious, a

task that will only grow more difficult as more of these cases are resolved and

the Government accordingly adjusts its operations (or is ruled to already

comply with the Constitution).

Finally, as the Texas Public Policy Foundation notes as amicus curiae,

our court does not break new ground by allowing Cochran to challenge her

adjudicator at the outset of her case. “Since 1792, federal statutes have

compelled district judges to recuse themselves when they have an interest in

the suit . . . .” Liteky v. United States, 510 U.S. 540, 544 (1994). Congress

has since enacted statutes to expand judicial recusal requirements. 13D

Charles Alan Wright et al., Federal Practice and

Procedure § 3551 (3d ed. 2002) (citing 28 U.S.C. §§ 144, 455). These

statutes serve “to protect the parties’ basic right to a fair trial in a fair

tribunal.” Caperton v. A.T. Massey Coal Co., 556 U.S. 868, 887 (2009). They

also serve to prevent harm to the public’s confidence in these tribunals. In re

Sch. Asbestos Litig., 977 F.2d 764, 776 (3d Cir. 1992). Given that

disqualification disputes concern the basic integrity of a tribunal, they must

be resolved at the outset of the litigation. So “virtually every circuit” allows

parties to promptly challenge a judge’s decision not to recuse. Id. at 778

(collecting cases, including from our circuit); see, e.g., In re Chevron U.S.A.,

Inc., 121 F.3d 163, 165 (5th Cir. 1997) (noting that “mandamus is an

issue presented here—whether the Exchange Act divested district court jurisdiction over

claims that SEC ALJs are unconstitutionally protected from removal. Accordingly, our

decision will not bear on related statutory-review scheme challenges, including, as the

dissenting opinion notes, the issue of whether the Seventh Amendment requires a jury for

securities fraud cases being decided in agency proceedings.

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appropriate legal vehicle for challenging the denial of a disqualification

motion”). That does not create an undue hindrance to the judicial system,

and the same logic applies to the SEC’s administrative system.

To sum up, Cochran’s removal power claim is wholly collateral to the

Exchange Act’s statutory-review scheme, is outside the SEC’s expertise, and

might never receive judicial review if district court jurisdiction were

precluded. Therefore, the Thunder Basin inquiry simply reaffirms that Free

Enterprise Fund controls this case and that Cochran’s removal power claim is

within the district court’s jurisdiction.

B. Ripeness

We now turn to the SEC’s other argument for affirmance: a lack of

ripeness. Ripeness doctrine reflects “Article III limitations on judicial

power” and “prudential reasons for refusing to exercise jurisdiction.” Reno

v. Cath. Soc. Servs., Inc., 509 U.S. 43, 57 n.18 (1993); see also Abbott Lab’ys v.

Gardner, 387 U.S. 136, 148 (1967) (explaining that the doctrine’s “basic

rationale is to prevent the courts, through avoidance of premature

adjudication, from entangling themselves in abstract disagreements”),

abrogated on other grounds by Califano v. Sanders, 430 U.S. 99 (1977). The

ripeness inquiry hinges on two factors: (1) “the fitness of the issues for

judicial decision”; and (2) “the hardship to the parties of withholding court

consideration.” Roark & Hardee LP v. City of Austin, 522 F.3d 533, 545 (5th

Cir. 2008) (quoting Monk v. Huston, 340 F.3d 279, 282 (5th Cir. 2003)).

Generally, issues are fit for judicial decision if “any remaining questions are

purely legal ones; conversely, a case is not ripe if further factual development

is required.” Id. However, some degree of hardship is always required to

establish ripeness. Id.

There is no dispute that Cochran’s removal power claim is a pure

issue of law, meaning that it is fit for judicial decision without any additional

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fact-finding. Further, if Cochran’s claim is meritorious, then withholding

judicial consideration would injure her by forcing her to litigate before an ALJ

who is unconstitutionally insulated from presidential control. See Stolt-

Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 670 n.2 (2010)

(determining that the petitioners had adequately demonstrated hardship

where withholding judicial review would have forced them to participate in

an arbitration proceeding that they alleged to be “ultra vires”); Sea-Land

Serv., Inc. v. Dep’t of Transp., 137 F.3d 640, 648 (D.C. Cir. 1998) (“The

concrete cost of an additional proceeding is a cognizable Article III injury.”).

Hence, both factors indicate that Cochran’s removal power claim is ripe.

In support of its argument that Cochran’s claim is not ripe, the SEC

principally relies on Energy Transfer Partners, L.P. v. FERC, 567 F.3d 134 (5th

Cir. 2009), and TOTAL Gas & Power North America, Inc. v. FERC, 859 F.3d

325 (5th Cir. 2017). As relevant here, in Energy Transfer Partners, a natural

gas company challenged the statutory authority of the Federal Energy

Regulatory Commission (“FERC”) to require it to participate in trial-type

enforcement proceedings before an ALJ. 567 F.3d at 137–38. TOTAL Gas

concerned a similar challenge to FERC administrative proceedings, including

a structural claim that FERC ALJs were unconstitutionally appointed.

859 F.3d at 334. In both cases, we concluded that the plaintiffs’ claims were

not ripe. Energy Transfer Partners, 567 F.3d at 146; TOTAL Gas, 859 F.3d at

339. Based on these cases, the SEC asserts that structural challenges to

ongoing administrative enforcement proceedings are not ripe until those

proceedings conclude.

Energy Transfer Partners and TOTAL Gas are both materially

distinguishable from this case. In Energy Transfer Partners, the plaintiff

sought judicial review of particular FERC orders, which we determined were

not sufficiently “final” so as to be susceptible to judicial review. 567 F.3d at

136, 139–44. By contrast, Cochran did not seek review of any particular SEC

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order; rather, she sought a declaration that SEC ALJs are unconstitutionally

insulated from the president’s removal power and an injunction barring the

SEC from continuing its administrative proceedings against her. Thus, the

concern in Energy Transfer Partners—the finality of agency action—is not

relevant to the issue of ripeness in this case.

Like Cochran, the TOTAL Gas plaintiffs sought a declaration that

FERC was precluded from conducting administrative enforcement

proceedings against them. 859 F.3d at 327. However, in that case, FERC

had not actually scheduled a hearing before an ALJ prior to the plaintiffs filing

suit. Id. at 336. Consequently, we held that the plaintiffs’ fear of being

subjected to a constitutionally defective proceeding was too speculative to

establish hardship for ripeness purposes. Id. at 337 (explaining that “whether

FERC ultimately takes actions that Total claims would violate its

constitutional rights rests on a series of contingencies and is not a certainty”).

As the SEC has already assigned Cochran’s case to an ALJ, her risk of

hardship is substantially more concrete than in TOTAL Gas. Therefore, we

hold that Cochran’s removal power challenge is ripe.

Accordingly, we AFFIRM the district court’s dismissal of Cochran’s

due process claim, REVERSE the dismissal of her removal power claim,

and REMAND for further proceedings consistent with this opinion.

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Andrew S. Oldham, Circuit Judge, joined by Smith, Willett,

Duncan, Engelhardt, and Wilson, Circuit Judges, concurring.

I agree with the majority that this case can be resolved based on the

statutory text in 28 U.S.C. § 1331 and 15 U.S.C. § 78y, along with Supreme

Court precedent interpreting those provisions. The dissent nonetheless looks

behind text and precedent to the purposes and policies of the Securities

Exchange Act of 1934. I disagree with the dissent for two principal reasons.

First, as should go without saying by now, “our inquiry begins with

the statutory text, and ends there as well if the text is unambiguous.” BedRoc

Ltd., LLC v. United States, 541 U.S. 176, 183 (2004). Here, the text is as

unambiguous as can be. Section 1331 creates jurisdiction, and § 78y strips

only part of it. The part that § 78y strips (as to “[a] person aggrieved by a

final order of the [SEC]”) undisputedly does not apply to Cochran. So

jurisdiction remains. And any conceivable dispute on that score is resolved

by Free Enterprise Fund v. Public Company Accounting Oversight Board, 561

U.S. 477 (2010). That should end this case.

Second, even if the dissent is correct to peer behind the text of § 78y,

what lurks back there is profoundly disturbing. Section 78y reflects the

thinking of men like Woodrow Wilson who argued that universal suffrage

would make the three branches of government ignorant, indolent, and

incapable of regulating modern affairs. Wilson’s solution? He wanted

administrative agencies to operate in a separate, anti-constitutional, and anti-

democratic space—free from pesky things like law and an increasingly

diverse electorate. One of Wilson’s acolytes, James Landis, was the SEC’s

founding father and drafted § 78y into the original Securities Exchange Act.

Landis hoped that the SEC could set upon Americans without interference

from courts—unless and until the SEC gave courts permission to review its

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work. That is obviously not how our government is supposed to work. And

in the Landisonian view, that’s precisely the point.

The balance of this opinion joins the dissent in considering “the 80-

plus year history of the SEC,” the purported policy “benefit[s] of agency

expertise,” and the supposed “efficiency” purpose of § 78y. Post, at 70, 90,

94 (Costa, J., dissenting). Part I explains the intellectual and statutory history

of § 78y. Part II explains Landis’s purposes and policy objectives. Then Part

III shows that § 78y falls short of Landis’s goal. It fails to give the SEC the

separate, anti-constitutional, and unaccountable space Landis wanted. And

all of this underscores why it’s important to interpret the words that

Congress enacted rather than the purposes Landis pursued. 1

I.

The separation of powers is the defining feature and virtue of our

Constitution. As James Madison wrote, “[t]he accumulation of all powers,

legislative, executive, and judiciary, in the same hands, whether of one, a few,

or many, and whether hereditary, self-appointed, or elective, may justly be

pronounced the very definition of tyranny.” The Federalist No. 47, at

301 (C. Rossiter ed. 1961). So the Founders separated the legislative,

executive, and judicial powers into three distinct branches and then balanced

them against one another. See The Federalist No. 51, at 321–23;

Bowsher v. Synar, 478 U.S. 714, 722 (1986) (“Even a cursory examination of

the Constitution reveals the influence of Montesquieu’s thesis that checks

1

I obviously do not think that any of my esteemed colleagues are sympathetic to

the profoundly anti-democratic views that motivated the SEC’s founding fathers. To the

contrary, I have the utmost respect for my colleagues, and I believe that all of us are

attempting to interpret the law as Congress wrote it and not as Landis imagined it. I also

believe, however, that we should take seriously the origins of § 78y rather than dismiss

them as a “screed.” Post, at 70 n.2 (Costa, J., dissenting).

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and balances were the foundation of a structure of government that would

protect liberty.”).

Wilson and Landis fundamentally disagreed with the Founders’

vision. Wilson and Landis thought the accumulation of all powers into one

set of hands was—far from a vice—a virtue. And they wanted those all-

powerful hands connected to an administrative agency, far away from the

three branches of government the Founders worked so hard to create,

separate, and balance. And most of all, Wilson and Landis wanted power as

far away from democracy and universal suffrage as possible.

A.

Woodrow Wilson derived his political theories from German

historicism. See Ronald J. Pestritto, Woodrow Wilson and

the Roots of Modern Liberalism 14 (2005); Philip

Hamburger, Is Administrative Law Unlawful? 458 (2014). In

1883, Wilson began his doctoral studies in history and government at Johns

Hopkins, where he studied under professors who had themselves been

educated in Germany—most notably, Richard T. Ely and Herbert Baxter

Adams, who both studied at the University of Heidelberg under Johann K.

Bluntschli, a renowned Hegelian state theorist. Pestritto, supra, at 8, 18.

These German historicists considered history an evolutionary process. See

id. at 9, 14 (citing Joseph Dorfman, The Role of the German Historical School in

American Economic Thought, 45 Am. Econ. Rev. 17 (1955)). They viewed

history as “a progression of . . . epochs,” through which each age’s “spirit”

becomes more advanced than the one preceding it. Id. at 15. “More advanced

historical spirits replace inferior ones through a dialectical process, where

progress is the result of great clashes, conflicts, and struggles.” Ibid. (citing

G.W.F. Hegel, The Philosophy of History 17–18 (J. Sibree

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trans., Dover Publ’ns 1956)). 2 “[H]istoricism has a particular future in mind,

and progress is all about reaching it.” Id. at 16.

In Wilson’s view, administration was key to reaching his idealized

future. Wilson lamented that “[u]p to [his] own day all the political writers

. . . had thought, argued, dogmatized only about the constitution of

government; about the nature of the state, the essence and seat of

sovereignty, popular power and kingly prerogative; about the greatest

meanings lying at the heart of government; and the high ends set before the

purpose of government by man’s nature and man’s aims.” Woodrow Wilson,

The Study of Administration, 2 Pol. Sci. Q. 197, 198 (1887). Back when the

nation was founded, he wrote, “[t]he functions of government were simple,

because life itself was simple.” Id. at 199. But things were different now: The

“difficulties of governmental action” in the modern era required a new

“science of administration which shall seek to straighten the paths of

government, . . . [and] strengthen and purify its organization.” Id. at 200–01.

Wilson lauded Europe for embracing this new science and chided

America for supposedly staying stuck in the past. The study of

administration, Wilson noted, “is a foreign science, speaking very little of the

language of English or American principle. It employs only foreign tongues;

it utters none but what are to our minds alien ideas.” Id. at 202. Though

Wilson appeared to recognize the implications of adopting German political

principles, he tried to reassure liberty-minded readers that administration

could be “Americanize[d].” Ibid. As Wilson put it:

If I see a murderous fellow sharpening a knife cleverly, I can

borrow his way of sharpening the knife without borrowing his

2

Hegel, like Wilson, held outrageous views on race. Hegel’s dialectic depended in

part on “advanced races” clashing with “inferior ones” and then either “defeating them”

“or assimilating them.” Pestritto, supra, at 15.

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probable intention to commit murder with it; and so, if I see a

monarchist dyed in the wool managing a public bureau well, I

can learn his business methods without changing one of my

republican spots. . . . We can thus scrutinize the anatomy of

foreign governments without fear of getting any of their

diseases into our veins; dissect alien systems without

apprehension of blood poisoning.

Id. at 220.

Notwithstanding his reassurance that German political principles

could be Americanized, Wilson elsewhere made clear that he would scrap the

Constitution if he could. One of his most notable departures from the

Constitution was his distaste for democracy and popular sovereignty—

especially after the document was amended to allow for an increasingly

diverse electorate. See Perez v. Mortgage Bankers Ass’n, 575 U.S. 92, 129 n.6

(2015) (Thomas, J., concurring in the judgment) (crediting Wilson’s “deep

disdain for the theory of popular sovereignty” as contributing to the

Progressive Era’s “move from the individualism that had long characterized

American society to the concept of a society organized for collective

action”); Hamburger, supra, at 371 n.e (noting that Wilson despised

democracy and described it as “a stage of development” that had to be left

behind).

During his early career—including his time at Johns Hopkins—

Wilson “complained bitterly about the ills of universal suffrage.”

Pestritto, supra, at 201. In his notes on English historian John Richard

Green, Wilson rhetorically questioned:

Is the principle of universal suffrage for instance consistent

with those principles of government which bear the sanction of

the wisest Englishmen of eight centuries and which have

secured personal freedom and political liberty to a great nation

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for more than eight hundred years? Is it necessary or even

compatible with the healthy operation of a free government?

Woodrow Wilson, Marginal Notes on John Richard Green, in 1 The Papers

of Woodrow Wilson 388 (Arthur S. Link ed., 1966). One entry in his

diary—which stated that “universal suffrage is at the foundation of every evil

in this country”—indicates that Wilson had answered his own questions:

“no” and “no.” Woodrow Wilson, Shorthand Diary, in 1 Papers, supra, at

143. And these views didn’t stay on the pages of his private papers. He also

included them in his seminal work on administration:

Even if we had clear insight into all the political past, and could

form out of perfectly instructed heads a few steady, infallible,

placidly wise maxims of government into which all sound

political doctrine would be ultimately resolvable, would the

country act on them? That is the question. The bulk of

mankind is rigidly unphilosophical, and nowadays the bulk of

mankind votes. A truth must become not only plain but also

commonplace before it will be seen by the people who go to

their work very early in the morning; and not to act upon it

must involve great and pinching inconveniences before these

same people will make up their minds to act upon it.

And where is this unphilosophical bulk of mankind more

multifarious in its composition than in the United States? To

know the public mind of this country, one must know the mind,

not of Americans of the older stocks only, but also of Irishmen,

of Germans, of negroes. In order to get a footing for new

doctrine, one must influence minds cast in every mould of race,

minds inheriting every bias of environment, warped by the

histories of a score of different nations, warmed or chilled,

closed or expanded by almost every climate of the globe.

Wilson, The Study of Administration, supra, at 209. And though Wilson

“dropped his overt opposition to universal suffrage as he matured,” even his

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post-presidency works remained steeped in racism. Pestritto, supra, at

202; see, e.g., Woodrow Wilson, The State 17, 20 (1918)

(contrasting “progressive races” and “stagnated nationalities”). 3

Wilson’s concern with democracy was that it “assume[s] a

discriminating judgment and a fullness of information on the part of the

people touching questions of public policy.” Wilson, The State, supra,

at 305. But because he believed people “do not often possess” such

judgment, ibid., Wilson concluded that “[t]he people should not govern; they

should elect the governors: and these governors should be elected for periods

long enough to give time for policies not too heedful of transient breezes of

public opinion,” Woodrow Wilson, Notes for “The Philosophy of Politics”, in

9 Papers, supra, at 132; but see Perez, 575 U.S. at 129 n.6 (Thomas, J.,

concurring in the judgment) (“In President Wilson’s view, public criticism

would be beneficial in the formation of overall policy, but ‘a clumsy nuisance’

in the daily life of Government—‘a rustic handling delicate machinery.’”

(quoting Wilson, The Study of Administration, supra, at 215)). And if a

government official must consult the public, he should have to hear only

“those who hit upon opinions fit to be made prevalent, and have the capacity

to make them so.” Woodrow Wilson, Democracy, in 7 Papers, supra, at 355.

3

Some believe Wilson’s views were based on his upbringing in the Confederate

South. See, e.g., Dan McLaughlin, The Confederate Roots of the Administrative State,

National Review (July 30, 2020) (“Bureaucratic, unelected, managerial government

in America had a surprising birthplace: the Confederate States of America. It would

ultimately be imported into the theory and practice of the federal government by a son of

the Confederacy: Woodrow Wilson.”). Others trace his opinions to German historicism.

See, e.g., Pestritto, supra, at 44 (“Wilson’s racism lies at a much more fundamental

level than mere prejudice. For him, some races are advanced historically and others are

backward; the best thing that can happen to the inferior races and peoples is to be defeated

and assimilated by their historical superiors.”); see also supra n.2 (recounting Hegel’s view

of slavery).

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In Wilson’s mind, most modern Americans didn’t meet that standard. See

Hamburger, supra, at 370–71 (describing Wilson’s classism and his view

that administration had the virtue of insulating elite power from popular

politics).

Wilson ran into an obvious problem: The Constitution affirmatively

prohibited the anti-democratic administrative system he wanted. Wilson saw

the separation of powers and the Founders’ system of checks and balances as

two of the Constitution’s chief defects. While at Johns Hopkins, Wilson

wrote:

It is . . . manifestly a radical defect in our federal system that it

parcels out power and confuses responsibility as it does. The

main purpose of the Convention of 1787 seems to have been to

accomplish this grievous mistake. The “literary theory” of

checks and balances is simply a consistent account of what our

constitution-makers tried to do; and those checks and balances

have proved mischievous just to the extent to which they have

succeeded in establishing themselves as realities. It is quite safe

to say that were it possible to call together again the members

of that wonderful Convention to view the work of their hands

in the light of the century that has tested it, they would be the

first to admit that the only fruit of dividing power had been to

make it irresponsible.

Woodrow Wilson, Congressional Government: A Study

in American Politics 187 (1885). Like democracy, Wilson thought

such structural limitations on power were unnecessary and even

incompatible with a functional government. In Wilson’s view: “No living

thing can have its organs offset against each other, as checks, and live.”

Woodrow Wilson, The New Freedom 47 (1913).

Wilson’s primary criticism of the separation of powers was that it

made government inflexible and inefficient. See Pestritto, supra, at 5

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(“Each of these features, to Wilson’s mind, made American government

inflexible and incapable of adjustment to necessary historical change.”). And

a government that was inflexible and inefficient could only trudge—not

sprint—toward progress:

It was the separation of powers that, among all of the objects of

Wilson’s criticism in the founders’ Constitution, caused him

the greatest distress and occupied much of his attention. For

Wilson, the separation of powers, and all of the other

institutional remedies that the founders employed against the

danger of faction, stood in the way of government’s exercising

its power in accord with the dictates of progress.

Id. at 6. For Wilson, that simply would not do.

Wilson therefore set out his own anti-constitutional vision in The

Study of Administration. “Judging by the constitutional histories of the chief

nations of the modern world,” Wilson believed there were “three periods of

growth through which government has passed in all the most highly

developed of existing systems.” Wilson, The Study of Administration, supra,

at 204. Nations begin in the period of “absolute rulers, and of an

administrative system adapted to absolute rule.” Ibid. As they progress, they

reach the second period, “that in which constitutions are framed to do away

with absolute rulers and substitute popular control, in which administration

is neglected for these higher concerns.” Ibid. And finally, they reach a level

of sophistication “in which the sovereign people undertake to develop

administration under this new constitution which has brought them into

power.” Ibid. Wilson was ready to lead America past its own Constitution

and into the third period “under this new constitution.” Ibid.

Wilson’s “new constitution” would ditch the Founders’ tripartite

system and their checks and balances for a “more efficient separation of

politics and administration, which w[ould] enable the bureaucracy to tend to

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the details of administering progress without being encumbered by the

inefficiencies of politics.” Pestritto, supra, at 227. The “political” sector

would encompass the three constitutional branches, while the

“administration” sector would operate independently. Wilson’s goal was to

completely separate “the province of constitutional law” from “the province

of administrative function.” Hamburger, supra, at 464.

Within this new dichotomy, the emphasis in government would shift

to administration. This newly conceptualized government—with a new

administrative “branch”—would “see[] to the daily rulemaking and

regulation of public life.” Pestritto, supra, at 165 (citing Woodrow

Wilson, Constitutional Government in the United

States 82–85 (1908)). “Administration, after all, is properly the province

of scientific experts in the bureaucracy; the experts’ competence in the

specific technological means required to achieve those ends on which we are

all agreed gives them the authority to administer or regulate progress,

unhindered by the realm of politics.” Id. at 127–28.

That of course required concomitant changes to the three branches of

constitutional government. And rather than amend the Constitution to

accomplish his purposes, Wilson thought it would be far more efficient to

simply command the three branches to submit. In Wilson’s view, Congress

must “understand its appropriate role in modern times.” Id. at 136.

Specifically, it must “abandon its stubborn insistence on its constitutionally

defined duty to legislate” and “cede[] rulemaking authority to the

bureaucracy.” Ibid. Only then could Congress step into its new role in

“oversee[ing] this function, not . . . attempt[ing] to carry it out itself.” Id. at

165.

The same was true of the President. In Wilson’s view, a modern

President must “look beyond his role as it is defined in the Constitution.” Id.

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at 168. The modern president should be focused on connecting to the public

and coordinating the government’s activities to the end of progress.

So too with the courts. Wilson subscribed to Bagehot’s theory of a “living

constitution,” and he believed that judges should “reflect what it is that each

generation wants out of government, and not [remain] stuck on an outdated

understanding of the purpose and role of government.” Id. at 115–17. “[T]he

members of the courts are necessarily men of their own generation,” and

Wilson “would not wish to have them men from another.” Wilson,

Constitutional Government, supra, at 185, 193.

B.

In the 1930s, President Franklin D. Roosevelt, James Landis, and their

fellow progressives picked up where Wilson had left off. “Reflecting th[e]

belief that bureaucrats might more effectively govern the country than the

American people, the progressives ushered in significant expansions of the

administrative state, ultimately culminating in the New Deal.” Perez, 575

U.S. at 129 n.6 (Thomas, J., concurring in the judgment).

One of Roosevelt’s most pressing progressive projects was securities

reform—an issue of debate since the 1907 stock market crash, which came

back into the spotlight after the 1929 market crash and the Depression.

During his presidential campaign, Roosevelt’s platform “advocated

‘regulation to the full extent of federal power, of . . . exchanges in securities

and commodities.’” Steve Thel, The Original Conception of Section 10(b) of the

Securities Exchange Act, 42 Stan. L. Rev. 385, 414 (1990) (quoting 7

History of American Presidential Elections 2742–43 (A.

Schlesinger, Jr. ed. 1985)).

“The process of transforming Roosevelt’s securities policy into a bill

began within hours of Roosevelt’s election.” Joel Seligman, The

Transformation of Wall Street 50 (1982). Roosevelt’s advisor,

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Felix Frankfurter, “looked to assemble a team to assist the new

administration in crafting a plan to implement the goals on which Roosevelt

had campaigned.” Ronald J. Pestritto, The Progressive Origins of the

Administrative State, 24 Soc. Phil. & Pol’y 16, 26 (2007). Frankfurter’s

team included Landis—his junior colleague at Harvard Law School—and

several other up-and-comers in the field of administrative law. Ibid. “[T]he

bill that became the Securities Act of 1933 was drafted over a weekend by

James Landis, Benjamin Cohen, and Thomas Corcoran, who were perhaps

aided by an excess of Scotch.” Cynthia A. Williams, The Securities and

Exchange Commission and Corporate Social Transparency, 112 Harv. L.

Rev. 1197, 1227 (1999) (citing Larry D. Soderquist & Theresa A.

Gabaldon, Securities Law 12 (1998) (discussing the legend that the

rushed Act was drafted over a case of Scotch)). Congress vested enforcement

of the 1933 Act in the newly created Federal Trade Commission—and

confirmed Landis as one of its inaugural Commissioners.

The next year, in 1934, Roosevelt decided to go further. And whom

did Roosevelt tap to lead the effort? Landis, of course. See Karl Shumpei

Okamoto, Rereading Section 16(B) of the Securities Exchange Act, 27 Ga. L.

Rev. 183, 229 n.153 (1992) (describing Landis as “the principal architect of

the [1934] Exchange Act”). Landis’s first draft of the bill contained a judicial-

review provision that is virtually identical to the one Congress enacted in

1934 and that continues to exist in § 78y today. Section 23(a) of Landis’s draft

provided in full:

Any person aggrieved by an order of the Commission may

obtain a review of such order in the Circuit Court of Appeals of

the United States, with any circuit wherein such person resides

or has his principal place of business, or in the Court of Appeals

of the District of Columbia, by filing in such court, within sixty

days after the entry of such order, a written petition praying

that the order of the Commission be modified or be set aside in

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whole or in part. A copy of such petition shall be forthwith

served upon the Commission, and thereupon the Commission

shall certify and file in the court a transcript of the record upon

which the order complained of was entered. No objection to the

order of the Commission shall be considered by the court

unless such objection shall have been urged before the

Commission. The finding of the Commission as to the facts, if

supported by evidence, shall be conclusive. If either party shall

apply to the court for leave to adduce additional evidence, and

shall show to the satisfaction of the court that such additional

evidence is material and that there were reasonable grounds for

failure to adduce such evidence the hearing before the

Commission, the court may order such additional evidence to

be taken before the Commission and to be adduced upon the

hearing in such manner and upon such terms and conditions as

to the court may seem proper. The Commission may modify

its findings as to the facts, by reason of the additional evidence

so taken, and it shall file such modified or new findings, which,

if supported by evidence, shall be conclusive, and its

recommendation, if any, for the modification or setting aside of

the original order. The jurisdiction of the court shall be

exclusive and its judgment an decree, affirming, modifying, or

setting side, in whole or in part, any order of the Commission,

shall be final, subject to review by the Supreme Court of the

United States upon certiorari or certification as provided in

sections 23 and 240 of the Judicial Code as amended (U.S.C.

title 28, secs. 346 and 347).

H.R. 7852, 73d Cong. § 23(a) (1934).

Roosevelt reviewed Landis’s draft bill, and he recommended it go

straight to Congress. Thel, supra, at 424–25. When the bill reached the

House Committee on Interstate and Foreign Commerce, Landis was the first

witness to testify. Id. at 395 n.39. And Landis told Congress that, naturally,

he and his agency would be perfect for enforcing the new 1934 Act: “The

Federal Trade Commission, I think, can be credited with efficiency in

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operation, a tradition of true service, and one of integrity; all qualities

demanded by an act of this type, and for that reason, the Commission itself,

I think, feels that it would like to undertake an activity of this type.” Stock

Exchange Regulation: Hearing on H.R. 7852 and H.R. 8720 Before the H. Comm.

on Interstate and Foreign Commerce, 73d Cong. 23 (1934) (statement of James

M. Landis, Commissioner, Federal Trade Commission). Congress reached a

sort of compromise. It adopted Landis’s bill—including the provision that

today appears in § 78y; rejected his request to make the FTC responsible for

enforcing it; but then confirmed Landis to lead the new agency (the Securities

and Exchange Commission) it created to enforce the 1934 Act. See Securities

Exchange Act of 1934, Pub. L. No. 73-291, § 25(a), 48 Stat. 881, 901–02;

Erwin N. Griswold, James McCauley Landis—1899-1964, 78 Harv. L.

Rev. 313, 314 (1964).

II.

The dissent makes much of the purposes behind the 1934 Act—

including the so-called “investigation/enforcement distinction,” the

importance of agency expertise, and the SEC’s purported need to complete

its work without judicial oversight. Obviously, none of this is in the text of the

Act itself.

It’s true, however, that these purposivist concepts date back to

Landis. Landis was convinced that bureaucrats had a monopoly on

governmental wisdom and that their critics were simply too stupid to

understand it. For example, Landis thought it “[s]omewhat hysterical[]”

that some derogatorily labeled the administrative state as the “fourth

branch” of government. James M. Landis, The Administrative

Process 47 (1938). He viewed the condemnation of the fourth branch as

superstitious—based “upon the mystical hypothesis that the number ‘four’

bespeaks evil or waste as contrasted with some beneficence emanating from

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the number ‘three.’” Ibid. And he chided these critics as being hindered by

“a too casual reading of constitutional history.” Ibid.

Landis took particular umbrage at criticisms from the judiciary. Judges

who failed to appreciate the SEC’s efforts were as ignorant as Americans

guided by numerology. And that’s why Landis did not trust courts to review

the SEC’s work. To the contrary, Landis wanted agencies to do the courts’

work.

A.

In The Administrative Process, Landis described the SEC’s process for

investigating potentially fraudulent statements included in a securities

registration form. See id. at 136–37. When a registrant filed a statement

including seemingly fraudulent statements, the SEC would begin “[a] quiet

investigation into the facts.” Id. at 137. If the investigation led the SEC to

believe there was in fact fraud, the agency would impose a stop order against

the registrant. Ibid. To avoid public attention and the pain of such

proceedings, registrants would often try to withdraw their registration

statements. Ibid. Landis did not think the SEC’s targets should get off so

easily, however. So the SEC promulgated a rule that disallowed registrants

from withdrawing their registration statements without the Commission’s

consent. Ibid. And pursuant to that rule, the SEC would deny its consent and

force registrants to defend themselves before the Commission—even after

the registrants stated that they did not want to defend themselves or their

statements. Ibid.

One such registrant challenged the rule and the SEC’s enforcement

practices. See Jones v. SEC, 298 U.S. 1 (1936). The petitioner asked the

Court: (1) whether the SEC could deny a request to withdraw a registration

statement, see id. at 18–25; and if so, (2) whether the SEC had the authority

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to interrogate the registrant about allegedly fraudulent propositions in his

registration statement after it had been withdrawn, see id. at 25–29.

In a stinging rebuke of the SEC, the Court answered each question

with an emphatic “no.” The Court concluded that “[t]he act contains no

provision upon the subject; and it may not be construed as attempting to

confer upon the commission an arbitrary power, under rule or otherwise, to

deny, without reason, a motion to dismiss.” Id. at 19. Not only was the Act

silent—the Court was also “unable to find any precedent for the assumption

of such power on the part of an administrative body.” Ibid. And, of course,

“at least in the absence of a statute to the contrary, the power of a

commission to refuse to dismiss a proceeding on motion of the one who

instituted it cannot be greater than the power which may be exercised by the

judicial tribunals of the land under similar circumstances.” Ibid. Given the

general rule for the federal courts—“that a plaintiff possesses the unqualified

right to dismiss his complaint at law or his bill in equity unless some plain

legal prejudice will result to the defendant other than the mere prospect of a

second litigation upon the subject matter”—the SEC would need to show

prejudice. Ibid. That it could not do. Id. at 22 (“We are unable to find

anything in the record, the arguments of the commission, or the decision of

the court below that suggests the possibility of any prejudice to the public or

investors beyond the assumption . . . that an unlimited privilege of withdrawal

would have the effect of allowing registrants whose statements are defective,

to withdraw before a stop order was issued and then to submit another

statement with slight changes.” (quotation omitted)).

The Court could have concluded there. But instead, it proceeded to

explain the danger of adopting the SEC’s argument to the contrary:

The action of the commission finds no support in right

principle or in law. It is wholly unreasonable and arbitrary. It

violates the cardinal precept upon which the constitutional

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safeguards of personal liberty ultimately rest—that this shall be

a government of laws—because to the precise extent that the

mere will of an official or an official body is permitted to take

the place of allowable official discretion or to supplant the

standing law as a rule of human conduct, the government

ceases to be one of laws and becomes an autocracy. Against the

threat of such a contingency the courts have always been

vigilant, and, if they are to perform their constitutional duties

in the future, must never cease to be vigilant, to detect and turn

aside the danger at its beginning.

Id. at 23–24. If administrative agencies “are permitted gradually to extend

their powers by encroachments—even petty encroachments—upon the

fundamental right, privileges and immunities of the people,” the Court

warned that “we shall in the end, while avoiding the fatal consequences of a

supreme autocracy, become submerged by a multitude of minor invasions of

personal rights, less destructive but no less violative of constitutional

guaranties.” Id. at 24–25.

Having determined that the registrant was entitled to withdraw his

registration statement, the Court continued to consider whether the SEC

may nevertheless interrogate him. See id. at 25. Given the reason for the stop

order had disappeared, the Court concluded that there was no longer any

basis to hail the registrant before the tribunal. Ibid. To require his presence

without reason, the Court stated, would lead to a mere “‘fishing expedition

. . . for the chance that something discreditable might turn up’—an

undertaking which uniformly has met with judicial condemnation.” Id. at 26

(alteration in original) (quoting Ellis v. Interstate Commerce Comm’n, 237 U.S.

434, 445 (1915)). And “[t]he fear that some malefactor may go unwhipped of

justice weighs as nothing against this just and strong condemnation of a

practice so odious.” Id. at 27.

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What’s more, there was no reason for the agency to insist upon its own

adjudication in the first place. The Constitution anticipated violations such

as fraud, and it instituted both a tribunal and proper procedures to review

such allegations: “The federal courts are open to the government; and the

grand jury abides as the appropriate constitutional medium for the

preliminary investigation of crime and the presentment of the accused for

trial.” Id. at 27. An investigation that disregards Article III and the Fifth

Amendment “is unlawful in its inception and cannot be made lawful by what

it may bring, or by what it actually succeeds in bringing, to light.” Ibid.; see

also id. at 26–28 (citing In re Pac. Ry. Comm’n, 32 F. 241 (N.D. Cal. 1887)

(Field, J.) (prohibiting unlawful inquisitorial investigations); Boyd v. United

States, 116 U.S. 616 (1886) (prohibiting compulsory self-accusation); Entick

v. Carrington, 19 How. St. Tr. 1030 (1765) (prohibiting unlawful searches and

seizures)). Allowing such investigations would bring back “those intolerable

abuses of the Star Chamber, which brought that institution to an end at the

hands of the Long Parliament in 1640.” Id. at 28. Based on that brooding risk,

the Court concluded, “[e]ven the shortest step in the direction of curtailing

[individual] rights must be halted in limine, lest it serve as a precedent for

further advances in the same direction, or for wrongful invasions of the

others.” Ibid.

Landis stated that he was “startle[d]” by the Court’s stinging rebuke

of his brainchild. Landis, supra, at 138. Had the Court stopped after

concluding that the SEC should have allowed the registrant to withdraw his

registration statement, Landis said, “one might have regretted its conclusion

as weighting the scales in favor of fraudulent promoters, but that would have

been all.” Ibid. Instead, the Court went on to compare the SEC to the Star

Chamber:

Such an outburst indicates that one is in a field where calm

judicial temper has fled. Deep feelings underlie this unguarded

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language of Mr. Justice Sutherland. They underlie, too, the

suggestion by the Chief Justice that the administrative is prone

to abuse the powers intrusted it. . . . If it is fair to apply the legal

rule that one intends the natural and probable consequences of

his acts, certainly the effect if not the purpose was to breed

distrust of the administrative.

Id. at 139–40.

Landis was deeply frustrated by the Jones Court’s rhetoric. In

Landis’s view, the Court’s reaction to the SEC’s efforts could be explained

only by the judiciary’s inability to understand his wisdom. And that judicial

ignorance spilled over to the public, again to Landis’s chagrin. Following the

Court’s decision in Jones, “every effort [by the SEC] to deal with fraudulent

promoters was met by the accusation that Star Chamber tactics were being

employed.” Id. at 140. Thus Landis lamented that America’s profoundly

ignorant people, “who have neither time nor the ability to grasp the precise

issue involved by a particular case,” understood the SEC’s “administrative

action as arbitrary and violative of ancient rights and privileges.” Ibid. That

was the judiciary’s fault—not the SEC’s.

B.

Landis convinced himself that administrative agencies were superior

to courts in every relevant way. See id. at 95–97 (arguing the judiciary’s role

should be “committed to the administrative for protection”). Landis

presented several reasons for the supposed superiority. For one, agency

adjudications were more efficient than court cases. See id. at 19 (“The

decisions of those [administrative] authorities which exercise judicial powers

are said to be several times as numerous as the recorded decisions of all the

Federal judicial courts.” (quotation omitted)). As another, their standards

and procedures were more practical. See id. at 49–50 (“Its bending of judicial

doctrine and procedure to realistic curvatures tends sometimes to offend the

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courts that supervise its activities.”). And of course, they were much more

modern. See id. at 96–97 (“Judicial interpretation suffered not only from

inexpertness but more from the slowness of that process to attune itself to

the demands of the day.”).

But above all, Landis emphasized, administrative agencies were

staffed by experts—unlike the common lawyers who served in the Third

Branch. Judges were “jacks-of-all-trades and masters of none” due to their

“breadth of jurisdiction and freedom of disposition.” Id. at 31. And if there’s

anything worse than a judge who’s unaware of his own “inadequacies,” id.

at 123, it’s a judge who’s both inadequate and prideful. “We must

remember,” Landis told his readers, “until a comparatively short time ago

Anglo-American government was essentially government by judges.” Id. at

135. “That class . . . had pride in its handiwork,” he continued, “[b]ut the

claim to pride tends, especially in the hands of lesser men, to be a boast of

perfection.” Ibid. Secretly insecure about their “lesser vision,” the judges

“claim[ed] Delphic powers, and rest[ed] the learning of the law upon an

affinity with deep and mysterious principles of justice that none but itself can

grasp.” Ibid. Hearing “any criticism of its inadequacies, any suggestion as to

its biases,” the judiciary developed a “[d]eep resentment” toward the expert

administrators. Ibid. “To admit to the dispensation of justice other

individuals, no matter how wise, who are not bound by the older disciplines,

[wa]s regarded by horror.” Ibid.

Landis’s solution to this problem was the same as Wilson’s: eliminate

or at least minimize the role of courts in our constitutional system.

Obviously, it would be best to eliminate the courts altogether. Otherwise,

“lodg[ing] a great, interpretive power in the judiciary involved the risk that a

policy, which initially was given to the administrative to formulate, might be

thwarted at its most significant fulcrum by judgments antagonistic to its

own.” Id. at 97. It would be far better, in Landis’s view, that the SEC could

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simply interrogate its targets ad infinitum—without the Jones Court ever

getting the right to interfere.

But if courts simply must be part of our constitutional order, Landis

said, their role must be minimized as far as possible. Landis disputed the idea

that all administrative action must be judicially reviewable. Id. at 124. Rather,

courts should be confined to determining little things—like “the regularity

of the procedure employed by the administrative” agency. Ibid. And Landis

was heartened by the Interwar Congresses, which tended “to decrease rather

than to increase the power of judges to impose checks upon the exercise of

administrative power.” Id. at 100.

III.

While it’s clear that Landis wanted to fully insulate his brainchild agency

against judicial oversight, it’s equally clear that the text passed by Congress

and signed by the President did not accomplish that purpose. As the Supreme

Court recently reminded us:

Efforts to ascribe unenacted purposes and objectives to a

federal statute face many of the same challenges as inquiries

into state legislative intent. Trying to discern what motivates

legislators individually and collectively invites speculation and

risks overlooking the reality that individual Members of

Congress often pursue multiple and competing purposes, many

of which are compromised to secure a law’s passage and few of

which are fully realized in the final product.

Va. Uranium, Inc. v. Warren, 139 S. Ct. 1894, 1907–08 (2019); see also

Rodriguez v. United States, 480 U.S. 522, 525–26 (1987) (per curiam) (“[N]o

legislation pursues its purposes at all costs.”).

In this case, however, both the dissent and the SEC would have us

read § 78y to accomplish Landis’s wildest dreams. The SEC’s litigation

position is a combination of “trust us, we’re the experts” and “there will be

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time for judicial review when we’re good and ready, thank you.” And the

dissent insists that our rejection of that position will “inject[] federal courts

into sensitive interbranch disputes.” Post, at 95 (Costa, J., dissenting). I

respectfully disagree with the SEC and the dissent, for all the reasons given

in the majority opinion. Here I merely respond to the dissent’s three principal

arguments to underscore our conclusion that the words in § 78y enacted by

Congress—as opposed to the unenacted purposes that motivated Landis—

do not strip jurisdiction over Cochran’s removal claim. 4

A.

The dissent breaks from the majority most sharply by distinguishing

this case from the Supreme Court’s materially identical case, Free Enterprise.

Though both cases involve plaintiffs challenging the removability of the SEC

adjudicators overseeing their respective administrative proceedings, the

4

Remarkably, Cochran’s removal claim is also connected to Wilson and Landis.

President Wilson and Louis Brandeis became friends during Wilson’s 1912 presidential

campaign. See G. Edward White, Allocating Power Between Agencies and Courts: The Legacy

of Justice Brandeis, 1974 Duke L.J. 195, 205 (1974). Brandeis then participated in drafting

the FTC’s organic statute. Ibid. Then, during the Supreme Court’s 1925–26 Term,

Brandeis’s law clerk was none other than—you guessed it, Landis. And in that Term, the

Court heard Myers v. United States, 272 U.S. 52 (1926)—the canonical removal-power

decision by Chief Justice Taft, which held that the President has the exclusive power to

remove executive officers. Brandeis, of course, dissented. “Both Landis and Brandeis

recognized the threat that this ruling posed to the development of a modern administrative

apparatus with significant discretionary powers and independence from the realm of

politics, and thus Landis worked closely on his Myers dissent.” Pestritto, Progressive

Origins, supra, at 30–31. Then, ironically, it was Landis who convinced Roosevelt that he

had constitutional power to remove William E. Humphrey from his position at the FTC—

thus giving rise to the landmark decision in Humphrey’s Executor v. United States, 295 U.S.

602 (1935), which limited Myers and largely vindicated the Brandeis dissent. Although

Roosevelt followed Landis’s advice and lost Humphrey’s Executor, Landis was “quite

pleased” with the result. Pestritto, Progressive Origins, supra, at 31. “[T]he defeat for the

president was meaningless in comparison with the great independence for administrators

that the Humphrey’s decision helped to secure.” Ibid.

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dissent says Free Enterprise (which involved a pending SEC investigative

proceeding) doesn’t apply in a case like Cochran’s (which involves a pending

SEC enforcement proceeding). See post, at 83–88 (Costa, J., dissenting). Our

sister circuits have made the same distinction. See, e.g., Hill v. SEC, 825 F.3d

1236, 1248 (11th Cir. 2016) (finding the district court lacked jurisdiction

because “[u]nlike the petitioners in Free Enterprise Fund,” Hill was the

subject of an SEC enforcement proceeding); Bennett v. SEC, 844 F.3d 174,

182 (4th Cir. 2016) (distinguishing between an SEC “inspection or

investigation” and an SEC “disciplinary proceeding”). But the

investigation-enforcement dichotomy is a distinction without a textual or

practical difference.

1.

Let’s start with the text. The current version of § 78y is almost

identical to the provision Landis wrote in 1934. See supra, at 12 (quoting

§ 23(a) as proposed and as enacted by Congress without material change in

§ 25(a) of the 1934 Act). Today the provision reads:

A person aggrieved by a final order of the Commission entered

pursuant to this chapter may obtain review of the order in the

United States Court of Appeals for the circuit in which he

resides or has his principal place of business, or for the District

of Columbia Circuit, by filing in such court, within sixty days

after the entry of the order, a written petition requesting that

the order be modified or set aside in whole or in part.

15 U.S.C. § 78y(a)(1). 5 Though Landis surely intended to filter (and

succeeded in filtering) as much litigation as possible through the SEC’s own

5

Under the 1934 Act as Landis wrote it, “[a]ny person aggrieved by an order issued

by the Commission” could seek judicial review, § 25(a), 48 Stat. at 901 (emphasis added),

whereas the current version of § 78y applies to “[a] person aggrieved by a final order of the

Commission,” 15 U.S.C. § 78y(a)(1) (emphasis added). Congress did not add the word

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“final” to § 78y until 1975. See Securities Acts Amendments of 1975, Pub. L. No. 94-29,

§ 20, 89 Stat. 97, 158. Two points about these texts bear emphasis.

First, Landis’s version of the statute precluded even more judicial review than the

current version of § 78y. That’s because Landis also included an exhaustion requirement,

and under the common law that existed at the time, such exhaustion requirements

disallowed judicial review of non-final agency action. See § 25(a), 48 Stat. at 902 (“No

objection to the order of the Commission shall be considered by the court unless such

objection shall have been urged before the Commission.”). As the Supreme Court once

emphasized, such exhaustion requirements—not the “any person aggrieved by an order”

language—operated to deny or delay judicial review:

[T]he long-settled rule of judicial administration [is] that no one is entitled

to judicial relief for a supposed or threatened injury until the prescribed

administrative remedy has been exhausted. That rule has been repeatedly

acted on in cases where, as here, the contention is made that the

administrative body lacked power over the subject matter. Obviously, the

rules requiring exhaustion of the administrative remedy cannot be

circumvented by asserting that the charge on which the complaint rests is

groundless and that the mere holding of the prescribed administrative

hearing would result in irreparable damage.

Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50–51 (1938). And it cannot be

contended that Congress added the word “final” to import this exhaustion-based denial of

judicial review into § 78y because the same 1975 amendment that added the word “final”

also retained the exhaustion requirement. See § 20, 89 Stat. at 159. Thus, whatever work

the word “final” does after 1975, it cannot be read to duplicate the work done by the

exhaustion requirement in Landis’s bill. See Antonin Scalia & Bryan A. Garner,

Reading Law: The Interpretation of Legal Texts 174 (2012) (describing

the canon against surplusage). (Nor can § 78y(c)(1)’s current exhaustion requirement do

the work it did back in Landis’s day without destroying multiple modern doctrines—

including Thunder Basin and pre-enforcement review under Abbott Laboratories v. Gardner,

387 U.S. 136 (1967)—that authorize judicial review before the conclusion of an agency

proceeding.)

Second, when Landis wrote the 1934 Act, Congress had not yet enacted the

Administrative Procedure Act (“APA”). It enacted the latter in 1946. Thus, when Landis

wrote the 1934 Act, its review provision provided the only statutory mechanism to seek

judicial view of “an order issued by the Commission,” whereas today targets like Cochran

can ignore § 78y and rely instead on the APA for a cause of action, see Cochran v. SEC, No.

19-cv-66-A, Doc. 1, at 20–21 (N.D. Tex. Jan. 18, 2019) (APA claims in Cochran’s

complaint). So Landis could limit judicial review of the SEC’s work simply by failing to

authorize it in the 1934 Act, whereas today the SEC must make the much harder showing

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channels, he didn’t capture everything. To the contrary, § 78y draws a bright

line between pre-final order and post-final order review: Those who are

“aggrieved by a final order” and seek “review of the order” fall within

§ 78y’s purview. Ibid. Those who aren’t and don’t, don’t.

The Supreme Court’s analysis in Free Enterprise tracks the distinction

in § 78y’s text. Some parties are aggrieved by a final order, and “[o]nce the

Commission has acted, aggrieved parties may challenge ‘a final order of the

Commission’ or ‘a rule of the Commission’ in a court of appeals under

§ 78y.” Free Enterprise, 561 U.S. at 489. But some parties have claims outside

the scope of § 78y, because the SEC and PCAOB can take actions that are not

“encapsulated in a final Commission order or rule.” Id. at 490. “[T]he text

[of § 78y] does not expressly limit the jurisdiction that other statutes confer

on district courts. Nor does it do so implicitly.” Id. at 489 (citation omitted).

Thus, parties with claims not covered by § 78y—that is, parties aggrieved by

SEC action other than a final order or rule—are free to invoke other

jurisdictional statutes to get their claims into federal court.

The SEC and the dissent attempt to redraw the line created by § 78y

and Free Enterprise. They would prefer an implicit dotted line precariously

positioned between investigation and enforcement. Attempting to justify this

line textually, the dissent invokes the principle that “[s]pecification of the

one implies exclusion of the other,” and argues that “section 78y’s grant of

jurisdiction to the aggrieved party’s local circuit or the D.C. Circuit only after

issuance of a final agency order” implies that other courts lack jurisdiction.

that a provision originally enacted to provide judicial review (however modestly in Landis’s

day) now operates as an implicit strip of jurisdiction over a cause of action that Congress

provided elsewhere. But cf. Abbott Lab’ys, 387 U.S. at 141 (“The mere fact that some acts

are made reviewable should not suffice to support an implication of exclusion as to others.

The right to review is too important to be excluded on such slender and indeterminate

evidence of legislative intent.”).

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Post, at 72–73 (Costa, J., dissenting) (quotation omitted). But the dissent begs

the key question in applying its principle to §78y: Precisely what jurisdiction

does that statute “specify” as allocated to the courts of appeals, such that

other courts are implicitly precluded from exercising it? As just discussed,

the statute draws the line at the point when a “final order of the Commission

[is] entered” and specifies that a court of appeals has jurisdiction over

challenges to that final order. 15 U.S.C. § 78y(a)(1). So, following the

principle that “specification of the one implies exclusion of the other,”

district court jurisdiction over such a challenge to the final order is precluded.

And that is the majority’s position in this case. The dissent claims it is merely

applying a venerable interpretive principle, but its argument really hinges on

its unjustified decision to draw a line between investigation and enforcement.

That line, unlike the majority’s final/non-final line, is unsupported by the

statute’s text.

2.

One might think that if the investigation-enforcement distinction

lacks a textual basis, perhaps it’s nonetheless a practical tool that neatly

tracks two dichotomous sets of on-the-ground SEC activities. Again, wrong.

Investigation and enforcement are two stages of the same administrative

process, conducted by the same division of the SEC. And it makes little

practical sense to draw a neat legal line between them, because the SEC

blends the two activities in a variety of ways, and even conducts both

simultaneously.

Investigation and enforcement are both carried out by the SEC’s

“Enforcement Division,” which is the division that “[1] recommend[s] the

commencement of investigations of securities laws violations,

[2] recommend[s] that the Commission bring civil actions in federal court or

before an administrative law judge, and [3] prosecut[es] these cases on behalf

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of the Commission.” Sec. & Exch. Comm’n, How Investigations Work (Jan.

27, 2017), https://perma.cc/VX42-USC3 (emphasis added). The process

begins when the SEC’s “official curiosity” is aroused, perhaps after a review

of periodic filings or a complaint by a competitor or whistleblower. Marc J.

Fagel et al., SEC Investigations and Enforcement Actions, in Securities

Litigation: A Practitioner’s Guide 14-4 (Robert F. Serio et al.

eds., 2018). Enforcement Division staff might open a “Matter Under

Inquiry” (“MUI”) and ask the target or other witnesses to provide

documents or give testimony voluntarily. From the SEC’s perspective,

“[t]he threshold determination for opening a new MUI is low” because of

the SEC’s incomplete information and desire for additional facts. Sec. &

Exch. Comm’n Div. of Enf’t, Enforcement Manual 13

(2017), https://perma.cc/WQ7R-QPYK.

If the SEC is not satisfied with the information it can procure

voluntarily, it might turn to more formal and coercive investigative tools. The

Director of the Enforcement Division can issue a “Formal Order of

Investigation,” delegating the SEC’s statutory authority to subpoena

documents and testimony, see 15 U.S.C. §§ 77s(c), 78u(b), to specific staff.

See 17 C.F.R. § 200.30–4(a)(1); Enforcement Manual, supra, at 17.

These staff are then “empowered to administer oaths and affirmations,

subp[o]ena witnesses, compel their attendance, take evidence, and require

the production of any books, papers, correspondence, memoranda,

contracts, agreements, or other records” deemed “relevant or material to the

inquiry.” 15 U.S.C. § 78u(b). After issuance of the formal order, staff may

begin to subpoena documents and testimony from the target and third

parties. This process “often last[s] months or even years.” Sec. & Exch.

Comm’n, Investor Bulletin: SEC Investigations (Oct. 22, 2014),

https://perma.cc/9688-Q3XY. And none of it is public unless the SEC

orders otherwise. 17 C.F.R. § 203.5.

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At some point during the investigation, if staff decide that an

administrative proceeding should be brought against the target, the “Wells

Process” begins. 6 At this point, the matter looks a lot like litigation, even

though it has not yet reached the “enforcement” side of the dissent’s

investigation-enforcement line. Staff members send a notice to the target;

this notice discloses the claims the staff have preliminarily determined to

pursue and summarizes the basis for those claims. See Enforcement

Manual, supra, at 19–20. The target is invited to respond with a Wells

submission—“essentially a brief setting forth factual, legal, and policy

arguments why an enforcement action is not appropriate (or at least why

certain charges or remedies are unwarranted).” Fagel et al., supra, at 14-14.

The target is also often permitted to meet with Enforcement Division staff

and view non-privileged portions of the investigative file. See

Enforcement Manual, supra, at 22. Sometimes this process facilitates

settlement between the target and the SEC, or—much less often—persuades

the SEC not to press its claims after all. But if the results of the Wells Process

do not satisfy the SEC staff, they may formally recommend that the

Commission bring an administrative action against the target. If the

Commissioners approve the recommendation, the Enforcement Division will

file an “order instituting proceedings,” at which point an ALJ is selected as

the hearing officer and the administrative adjudication officially begins. See

17 C.F.R. § 201.200(a)–(b).

But the investigation does not necessarily stop when the enforcement

starts. Staff may continue to issue investigatory subpoenas “under the same

investigation file number or pursuant to the same [Formal Order of

6

The SEC has discretion to dispense with the Wells Process. But it conducts the

process “[i]n virtually every case other than those requiring emergency relief.” Fagel et al.,

supra, at 14-14.

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Investigation] under which the investigation leading to the institution of

proceedings was conducted,” as long as the hearing officer is promptly

informed of the subpoenas and the subpoenas are “not for the purpose of

obtaining evidence relevant to the proceedings.” Id. § 201.230(g). And if the

continuing investigation happens to yield relevant evidence, there’s no bar

on using it in the ongoing enforcement proceeding. See ibid. (only requiring

that such evidence be “made available to each respondent for inspection and

copying on a timely basis”).

Meanwhile, the ALJ—like the SEC staff who just investigated and

might still be investigating—may explore the facts by issuing subpoenas,

administering oaths and hearing testimony, and receiving relevant evidence

from both sides. Id. § 201.111(a)–(c). After the ALJ conducts the hearing, the

ALJ prepares an initial decision. Id. § 201.111(i). If the defendant loses, they

may appeal to the full Commission—the same body that already approved

the Enforcement Division’s recommendation to bring an administrative

action against them.

Only after the full Commission considers the appeal and issues a final

decision may the defendant use § 78y to get review in a federal court of

appeals. But most defendants don’t make it to federal court following this

path, because first they’d have to wade through the SEC’s lengthy

investigation-and-enforcement amalgam. See Gideon Mark, SEC and CFTC

Administrative Proceedings, 19 U. Pa. J. Const. L. 45, 57 (2016) (stating

that “during the period 2002-2014 the SEC’s settlement rate remained

constant at about 98%”). Given how little the investigation-enforcement line

matters to the SEC, it’s unclear why it matters so much to the dissent.

3.

Not only is the dissent’s investigation-enforcement line atextual and

artificial, it’s also illogical. The dissent suggests that respondents in

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enforcement proceedings do not face the same catch-22 that the Free

Enterprise petitioners faced as subjects of mere investigation. See post, at 87–

89 (Costa, J., dissenting); see also Bebo v. SEC, 799 F.3d 765, 774–75 (7th Cir.

2015). In other words, the dissent thinks Cochran doesn’t face the intolerable

requirement that she “bet the farm” to “test[] the validity of the law,” see

Free Enterprise, 561 U.S. at 490, because she is already in an enforcement

proceeding and therefore the proverbial “farm” is already bet.

Wrong again. Throughout the entire administrative process—

regardless of whether enforcement has begun—the target must choose

whether to settle or bet the farm. And the SEC places substantial pressure on

targets to choose the former. See Jay Clayton, Statement Regarding Offers of

Settlement (July 3, 2019), https://perma.cc/MTZ9-5HEE (praising the

“demonstrated willingness of the Commission to litigate zealously if a timely

and reasonable offer of settlement is not made”); Urska Velikonja, Are the

SEC’s Administrative Law Judges Biased? An Empirical Investigation, 92

Wash. L. Rev. 315, 364–65 (2017) (noting that enforcement-proceeding

defendants’ “willingness to settle may be affected by their perception that

ALJs are less fair” and that “[t]he SEC has reportedly threatened

investigated parties with litigation before ALJs if they are unwilling to

settle”). In addition to such “sticks,” the SEC also uses powerful “carrots”

to coerce settlements. For example, the Commission will settle on a “neither

admit nor deny” basis that allows defendants to avoid admitting liability; it

will also waive important collateral consequences—like the loss of well-

known seasoned issuer status—that would otherwise follow from an

unfavorable result in enforcement proceedings. See Fagel et al., supra, at 14–

17. Given these carrots and sticks, “choosing to litigate is, in fact, equivalent

to ‘betting the farm.’” Tilton v. SEC, 824 F.3d 276, 298 n.5 (2d Cir. 2016)

(Droney, J., dissenting).

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Of course, one cost of settlement is that a defendant gives up her right

to challenge the SEC in court. So the tremendous pressure to settle with the

SEC bears primary responsibility for the “you-must-bet-the-farm-to-get-

your-day-in-court” dynamic that the Court found objectionable in Free

Enterprise. See 561 U.S. at 490. And that pressure persists throughout

investigation and enforcement. Indeed, the pressure is likely greatest after

the SEC converts the investigation into a full-fledged enforcement

proceeding. Barring access to the district court at this point—without a

textual warrant for doing so—is untenable.

The investigation-enforcement distinction also illogically precludes

Cochran’s claim as soon as it ripens. Cochran claims that the ALJ presiding

over her administrative adjudication was unconstitutionally protected from

removal. Before the SEC’s order instituting proceedings, no ALJ had been

assigned to or involved in her case, so any challenge to the removal

protections of SEC ALJs would have been unripe. See Abbott Lab’ys v.

Gardner, 387 U.S. 136, 148–49 (1967) (ripeness requires that the effects of

the challenged policy be “felt in a concrete way by the challenging parties”).

As soon as the SEC issued its order instituting proceedings and assigned an

ALJ to Cochran’s case, her claim ripened because that’s when an official with

an alleged constitutional defect started presiding over her case. But under the

dissent’s dichotomy, that was also the exact moment her claim disappeared.

And her claim would remain illusory, under the dissent’s view, until well

after the ALJ in question is finished with the case, at which point the claim

would suddenly reappear and could be asserted in a federal court of appeals.

Thus, according to the dissent, a removal-power claim can be justiciable

during an SEC investigation (e.g., Free Enterprise); ripen and then

immediately disappear when the SEC commences an enforcement

proceeding (e.g., this case); and reappear again after the SEC concludes its

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enforcement proceeding (e.g., Jarkesy, see post, at 82 (Costa, J., dissenting)).

This peekaboo approach to constitutional claims makes very little sense.

The dissent nonetheless asserts that allowing Cochran to seek review

when her claim ripens would allow a novel and disruptive form of

“midenforcement review.” Post, at 72, 85 n.12 (Costa, J., dissenting). This

characterization distorts both the law and the facts. First, the law: The door

to judicial review remains open under 28 U.S.C. § 1331 unless another statute

closes it. See Free Enterprise, 561 U.S. at 489. So if no statute precludes

review, courts may consider a removal claim while the agency continues

working, as Free Enterprise itself demonstrates. See id. at 487 (reviewing a

challenge brought after PCAOB opened a formal investigation but before that

investigation concluded); see also Thunder Basin Coal Co. v. Reich, 510 U.S.

200, 212–13 (1994) (explaining when judicial review is available and citing

cases where an ongoing administrative proceeding did not preclude review).

Moreover, what the dissent maligns as “midenforcement review” is simply

another form of interlocutory review. And federal courts routinely entertain

applications for interlocutory relief in numerous contexts—without causing

dysfunction in the judicial system. See, e.g., Cohen v. Beneficial Indus. Loan

Corp., 337 U.S. 541, 546 (1949) (collateral-order doctrine); Johnson v. Jones,

515 U.S. 304 (1995) (qualified immunity); Fed. R. App. P. 8 (stay

motions); Fed. R. Civ. P. 23(f) (class certification); 28 U.S.C. § 1292

(interlocutory decisions); id. § 1651(a) (mandamus).

Second, the facts: Cochran did not wait until the “middle” of her

enforcement proceedings to seek judicial review. Rather, once her case was

reassigned to a new ALJ following Lucia, she presented her claims by motion

to the ALJ and then filed this action—before the ALJ had scheduled a hearing

or the SEC had taken any substantial steps to prosecute her case before the

new ALJ. If some other enforcement target in some future case actually waits

until the middle of an enforcement proceeding before raising a constitutional

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claim, then a federal court could and should consider that fact in deciding

whether the balance of equities favors a stay. See Nken v. Holder, 556 U.S.

418, 434 (2009); Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

That’s precisely what we do in other interlocutory contexts. See, e.g., Benisek

v. Lamone, 138 S. Ct. 1942, 1944 (2018) (exercising interlocutory review over

denial of injunction and affirming because “unnecessary, years-long delay in

asking for preliminary injunctive relief weighed against [plaintiffs’]

request”). Indeed, even under the collateral-order doctrine—where the

standards for appealability are far from clear-cut, see Henry v. Lake Charles

Am. Press, LLC, 566 F.3d 164, 173 (5th Cir. 2009)—we police such

jurisdictional lines on an almost daily basis. The dissent offers no reason to

think that we’ll be less able to weed out abusive SEC petitioners using

Thunder Basin and Nken than we’re able to weed out, say, abusive qualified-

immunity appellants under Johnson v. Jones or abusive civil litigants who

want to stretch the Cohen requirements to appeal routine discovery orders.

In sum, the dissent would bar Cochran from bringing her claim at the

most natural time to adjudicate it—once she begins to concretely suffer harm

from the allegedly unconstitutionally insulated ALJ. And would do so by

relying on an investigation-enforcement distinction that has no basis in the

text of § 78y, makes no practical sense in light of the SEC’s enforcement

procedures, and is illogical. Once the investigation-enforcement distinction

is rejected as atextual, artificial, and illogical, Free Enterprise plainly controls

and gives Cochran the opportunity to bring her claim in district court.

B.

The dissent is quite right that our court is the first to apply Free

Enterprise to investigative and enforcement proceedings alike. But in addition

to faithfully applying that materially indistinguishable opinion, our approach

aligns with other Supreme Court precedent. When faced with a judicial

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review provision like that in § 78y, courts use three “Thunder Basin factors”

to determine whether a plaintiff’s specific “claims are of the type Congress

intended to be reviewed within this statutory structure.” Thunder Basin, 510

U.S. at 212. These factors are (1) whether “a finding of preclusion could

foreclose all meaningful judicial review”; (2) whether the claims are

“‘wholly “collateral”’ to a statute’s review provisions”; and (3) whether the

claims are “outside the agency’s expertise.” Id. at 212–13 (quoting Heckler v.

Ringer, 466 U.S. 602, 618 (1984)). All three factors support Cochran’s right

to pursue her removability claim in district court, as the majority opinion

explains. But two Supreme Court cases decided just this year further solidify

this conclusion and undermine the dissent’s contrary position.

1.

Begin with the “meaningful judicial review” factor. If funneling a

particular claim through the statutory review mechanism will deny a plaintiff

meaningful judicial review of that claim, that suggests the statute did not

implicitly preclude district court jurisdiction over the claim. Applying this

factor to Cochran’s claim, the key case is Collins v. Yellen, 141 S. Ct. 1761

(2021).

Like Cochran, the petitioners in Collins claimed that agency officials

who had made decisions that harmed them were unconstitutionally protected

from removal. The Supreme Court agreed with the petitioners that certain

removability protections were unconstitutional. But “[a]ll the officers [in

question] were properly appointed,” so the Court found that their actions

were not automatically rendered void by virtue of the unconstitutional

removal protections. Id. at 1787. Thus, because Collins was a removability

case, the Supreme Court did not grant the same remedy that it had previously

granted in unconstitutional appointment cases—namely, the right to a new

hearing before a new ALJ after the constitutional defect was cured. E.g., Lucia

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v. SEC, 138 S. Ct. 2044, 2055 (2018) (concluding that petitioner was entitled

to a new hearing before a properly appointed official). The Court chose to

remand the remedy question, but it did suggest that winning retrospective

relief in removability cases requires a showing of harm specifically

attributable to the unconstitutional removal protection. For example,

retrospective relief would be available if “the President had made a public

statement expressing displeasure with actions taken by a Director and had

asserted that he would remove the Director if the statute did not stand in the

way.” Collins, 141 S. Ct. at 1789.

This suggestion indicates that it will be very challenging to obtain

meaningful retrospective relief for constitutional removability claims after

Collins. Winning the merits of the constitutional challenge will not be enough,

as it has been in appointment cases like Lucia. Challengers will also need to

identify a retroactively vindicable harm inflicted by the unconstitutional

removal protection. It is unclear how often challengers will be able to do

this—the examples hypothesized by the Collins Court, like a public statement

that an officer would have been removed but for a removal protection, are

quite uncommon occurrences. Thus, challengers with meritorious

removability claims may often be left without any remedy if they are forced

to wait until after enforcement proceedings conclude and bring their claims

through § 78y.

The “meaningful judicial review” factor thus requires an alternative

path to court for targets of SEC enforcement proceedings. A person subject

to an unconstitutional adjudication should at least be able to sue for

declaratory relief requiring a constitutionally structured proceeding. Cf. Free

Enterprise, 561 U.S. at 513 (finding petitioners “entitled to declaratory relief

sufficient to ensure that the . . . standards to which they are subject will be

enforced only by a constitutional agency accountable to the Executive”).

After Collins, this may be the only way to provide a “‘meaningful’ avenue of

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relief” for claims like Cochran’s and check the agency’s Landisonian

tendency toward exclusive, unimpeded control over the way it investigates

and proceeds against its targets. Free Enterprise, 561 U.S. at 491 (quoting

Thunder Basin, 510 U.S. at 212).

2.

Consider the final two Thunder Basin factors: whether the claims are

“wholly collateral” to a statute’s review provisions, and whether they are

“outside the agency’s expertise.” 510 U.S. at 212 (quotation omitted). The

key case here is Carr v. Saul, 141 S. Ct. 1352 (2021).

In Carr, disability claimants before the Social Security Administration

whose claims had been rejected by the Administration’s ALJs argued that the

ALJs had not been validly appointed under the Appointments Clause. The

Administration responded that the claimants had forfeited this argument by

failing to raise it before the agency. The Supreme Court rejected the

Administration’s position, holding that an issue-exhaustion requirement

should not be imposed on the petitioners’ Appointments Clause claims. This

holding rested on a finding that “adversarial development” of the

petitioners’ structural constitutional claim “simply did not exist” in the ALJ

proceedings. Id. at 1362 (quoting Sims v. Apfel, 530 U.S. 103, 112 (2000)).

This finding suggests that structural constitutional challenges often cannot

be meaningfully aired in administrative proceedings. And that supports the

conclusion that they are “wholly collateral” to those proceedings. 7

7

Unlike the disability claimants in Carr, who could not have made their

constitutional claims to the SSA Commissioner before judicial review, see Carr, 141 S. Ct.

at 1361, the SEC’s administrative review scheme would allow Cochran to make her claim

to the SEC Commissioners before § 78y came into play. But as in Carr, the SEC has

provided no indication that its administrative proceedings could or would yield any

meaningful adversarial development of Cochran’s structural constitutional claim.

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The Carr Court also repeatedly observed that structural

constitutional challenges are outside the expertise of agency ALJs. See id. at

1360 (“[A]gency adjudications are generally ill suited to address structural

constitutional challenges, which usually fall outside the adjudicators’ areas

of technical expertise.”); id. at 1361 (“Petitioners assert purely constitutional

claims about which SSA ALJs have no special expertise.”). These statements

should erase any doubt that the “agency expertise” factor supports Cochran.

The dissent resists this conclusion by arguing that we should consider

whether the ALJ has expertise regarding the “overall case,” not the specific

claim Cochran wants to bring in district court. Post, at 90 (Costa, J.,

dissenting). This is appropriate, the argument goes, because the ALJ’s

expertise-guided ruling on other issues might moot Cochran’s constitutional

claim. This approach has several problems. For one, it stacks the deck against

judicial review, such that the “agency expertise” factor will always favor the

agency—because agency enforcement proceedings, considered in their

entirety, always relate to the agency’s area of expertise. Second, it is flatly

inconsistent with Thunder Basin’s focus on whether “claims . . . [are] outside

the agency’s expertise,” not whether cases are. 510 U.S. at 212. Finally, it

rests on an overreading of Elgin v. Department of Treasury, where the Court

noted that in the particular dispute in that case, the agency might use

statutory interpretation to alleviate the petitioners’ constitutional concerns.

567 U.S. 1, 23 (2012). Elgin did not purport to transform the Thunder Basin

test from a claim-focused inquiry to a case-focused inquiry. And Carr

establishes beyond any doubt that Cochran’s claim is outside the expertise of

the SEC.

C.

Efficiency was James Landis’s biggest worry. He called it “the

desperate need” of government. Landis, supra, at 24. The administrative

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state was the only way that “tripartite political theory” could respond to “the

demand that government . . . provide for the efficient functioning of the

economic processes of the state.” Id. at 16. And the end of efficiency was best

served by moving as many functions as possible—legislative, executive, and

judicial—to administrative agencies. Judicial functions in particular were

best handled by administrative agencies, because “the judicial process”

struggled “to make the necessary adjustments in the development of both

law and regulatory methods” to promote efficient industry and governance.

Id. at 30. In this case, the dissent agrees that administrative rather than

judicial review is the more efficient course. Post, at 93–95 (Costa, J.,

dissenting). But there are at least three problems with that.

First and most importantly, when Congress vests a district court with

jurisdiction, it’s obliged to exercise it—efficiencies aside. Long before Landis

lodged his objections, Chief Justice Marshall affirmed that federal courts

must take cases within their jurisdiction: “We have no more right to decline

the exercise of jurisdiction which is given, than to usurp that which is not

given.” Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821). By now it is

well established that, with exceptions not relevant here, “federal courts have

a strict duty to exercise the jurisdiction that is conferred upon them by

Congress.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). The

“efficiency” of exercising jurisdiction is irrelevant. If you have it, you

exercise it; if you don’t, you don’t.

Second, even if efficiency mattered, the exercise of jurisdiction would

be no more inefficient in Cochran’s case than in Free Enterprise, where the

Supreme Court held that § 78y did not strip district court jurisdiction during

ongoing

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