Respondents Brief — Securities and Exchange Commission, et al., Petitioners v. Michelle Cochran

No. 21-1239

In the

Supreme Court of the United States

————

SECURITIES AND EXCHANGE COMMISSION, ET AL.,

Petitioners,

v.

MICHELLE COCHRAN,

Respondent.

————

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

————

BRIEF FOR RESPONDENT

————

MARGARET A. LITTLE

MARKHAM S. CHENOWETH

RICHARD A. SAMP

KARA M. ROLLINS

NEW CIVIL LIBERTIES

ALLIANCE

1225 19th Street, NW

Suite 450

Washington, DC 20036

GREGORY G. GARRE

Counsel of Record

MARGARET A. UPSHAW

BLAKE E. STAFFORD

LATHAM & WATKINS LLP

555 Eleventh Street, NW

Suite 1000

Washington, DC 20004

(202) 637-2207

gregory.garre@lw.com

Counsel for Respondent

QUESTION PRESENTED

Whether the Securities Exchange Act of 1934

implicitly strips federal district courts of jurisdiction

to adjudicate structural constitutional claims

challenging Securities and Exchange Commission

administrative proceedings.

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED ......................................... i

TABLE OF AUTHORITIES ..................................... iii

INTRODUCTION .......................................................1

STATEMENT OF THE CASE ....................................3

A. Legal Background ............................................3

B. Factual Background .........................................6

C. Proceedings Below ............................................7

ARGUMENT .............................................................11

I. THE QUESTION PRESENTED IS UNDENIABLY

CERTWORTHY ........................................................12

II. THE COURT SHOULD GRANT REVIEW AND

CONSIDER THIS CASE ALONGSIDE AXON ...............15

CONCLUSION ..........................................................26

iii

TABLE OF AUTHORITIES

Page(s)

CASES

Axon Enterprise, Inc. v. FTC,

986 F.3d 1173 (9th Cir. 2021), cert.

granted, 142 S. Ct. 895 (2022) .......................... 13

Axon Enterprise, Inc. v. FTC,

142 S. Ct. 895 (2022)................................... 10, 11

Babb v. Secretary, Department of Veterans

Affairs,

802 F. App’x 548 (11th Cir. 2020) .................... 22

Babb v. Secretary, Department of Veterans

Affairs,

992 F.3d 1193 (11th Cir. 2021)......................... 22

Babb v. Wilkie,

140 S. Ct. 1168 (2020)....................................... 22

Bebo v. SEC,

799 F.3d 765 (7th Cir. 2015), cert.

denied, 577 U.S. 1236 (2016) ...................... 12, 16

Bennett v. SEC,

844 F.3d 174 (4th Cir. 2016)....................... 12, 16

Crawford v. Martinez,

540 U.S. 1217 (2004) ......................................... 15

Duka v. SEC,

103 F. Supp. 3d 382 (S.D.N.Y. 2015) ............... 13

iv

TABLE OF AUTHORITIES—Continued

Page(s)

Elgin v. Department of the Treasury,

567 U.S. 1 (2012) ............................................... 17

Free Enterprise Fund v. Public Co.

Accounting Oversight Board,

561 U.S. 477 (2010) ................................... 4, 6, 17

Gray Financial Group, Inc. v. SEC,

166 F. Supp. 3d 1335 (N.D. Ga. 2015),

vacated sub nom. Hill v. SEC, 825 F.3d

1236 (11th Cir. 2016) ........................................ 13

Gupta v. SEC,

796 F. Supp. 2d 503 (S.D.N.Y. 2011) ............... 13

Hill v. SEC,

114 F. Supp. 3d 1297 (N.D. Ga. 2015),

vacated, 825 F.3d 1236 (11th Cir. 2016) .......... 13

Hill v. SEC,

825 F.3d 1236 (11th Cir. 2016)................... 12, 16

Ironridge Global IV, Ltd. v. SEC,

146 F. Supp. 3d 1294 (N.D. Ga. 2015) ............. 13

Jarkesy v. SEC,

803 F.3d 9 (D.C. Cir. 2015) ......................... 12, 16

Lucia v. SEC,

138 S. Ct. 2044 (2018)............................. 3, 4, 5, 7

Miller v. Gammie,

335 F.3d 889 (9th Cir. 2003)............................. 21

v

TABLE OF AUTHORITIES—Continued

Page(s)

Taylor v. Grubbs,

930 F.3d 611 (4th Cir. 2019)............................. 21

Technical Automation Services Corp. v.

Liberty Surplus Insurance Corp.,

673 F.3d 399 (5th Cir. 2012)............................. 21

Thunder Basin Coal Co. v. Reich,

510 U.S. 200 (1994) ................................... 2, 6, 17

Tilton v. SEC,

824 F.3d 276 (2d Cir. 2016), cert. denied,

137 S. Ct. 2187 (2017)..................3, 12, 13, 14, 16

Yee v. City of Escondido,

503 U.S. 519 (1992) ........................................... 16

STATUTES

5 U.S.C. § 1202(d)..................................................... 4

5 U.S.C. § 7521(a)..................................................... 4

15 U.S.C. § 45(d)..................................................... 19

15 U.S.C. § 78d-1(b) ................................................. 4

15 U.S.C. § 78y ......................................................... 1

15 U.S.C. § 78y(a)(1) ................................................ 5

15 U.S.C. § 78y(a)(3) .......................................... 5, 18

15 U.S.C. § 78y(c)(2) ................................................. 5

vi

TABLE OF AUTHORITIES—Continued

Page(s)

15 U.S.C. § 78bb(a)(2) ............................................ 19

OTHER AUTHORITIES

Jean Eaglesham, SEC Wins with In-House

Judges, Wall St. J. (May 6, 2015),

https://on.wsj.com/3L4cPUN .......................... 3, 5

In re David S. Hall, P.C., Exchange Act

Release No. 77718, 2016 WL 1665164

(Apr. 26, 2016)..................................................... 7

Press Release, SEC, SEC Announces

Enforcement Results for FY 2021

(Nov. 18, 2021),

https://www.sec.gov/news/pressrelease/2021-238 ................................................. 3

In re Southeast Investments, N.C., Inc.,

Exchange Act Release No. 86097, 2019

WL 2448245 (June 12, 2019) .............................. 5

SEC Rule of Practice 102(e)(1) ................................ 5

Stephen M. Shapiro et al., Supreme Court

Practice (11th ed. 2019) .............................. 12, 15

Sup. Ct. R. 14.1(a) .................................................. 16

Sup. Ct. R. 27.3 ...................................................... 15

INTRODUCTION

The petition for certiorari presents a question that

has divided the circuits and warrants this Court’s

review. The government asks this Court to hold the

petition pending the Court’s decision in Axon

Enterprise, Inc. v. FTC, No. 21-86 (cert. granted Jan.

24, 2022), which will be argued next Term, and

dispose of it in light of Axon. For several reasons,

however, it is imperative that the Court grant the

petition now and consider this case alongside Axon.

As the petition observes (at 6), the circuits are

openly split on the precise question presented in this

case: Whether the scheme of administrative and

judicial review in the Securities Exchange Act of 1934

(Exchange Act), 15 U.S.C. § 78y, implicitly strips

federal district courts of jurisdiction to hear

structural

constitutional

claims

challenging

Securities and Exchange Commission (SEC)

administrative proceedings.

Indeed, the Fifth

Circuit’s en banc decision in this case created the

circuit conflict.

This question is enormously

important for the hundreds of individuals, like

respondent Michelle Cochran, embroiled in

financially, professionally, reputationally, and

personally ruinous SEC administrative proceedings

superintended by Executive-branch officers acting

without legitimate, constitutional authority.

In Axon, this Court will consider the same

jurisdiction-stripping question—in the context of the

Federal Trade Commission (FTC) Act. The Court’s

resolution of that question, however, will not

necessarily resolve the circuit split, which has arisen

in the SEC context. As the government’s petition in

this case indicates, the jurisdiction-stripping analysis

2

is grounded in the specific “statutory review scheme”

at issue. Pet. 6; see Thunder Basin Coal Co. v. Reich,

510 U.S. 200, 212 (1994) (“[T]he question [is] whether

petitioner’s claims are of the type Congress intended

to be reviewed within this statutory structure.”

(emphasis added)). The question presented in Axon,

however, is expressly tied to the statutory review

scheme in the FTC Act. See Pet. i, Axon, supra (No.

21-86) (Axon Pet.).

Although the government

currently represents that the FTC Act and the

Exchange Act are “materially identical,” Pet. 6, in fact

there are differences between the statutes, as Axon

itself and the Fifth Circuit’s decision below highlight.

Hence, the government’s assurances today cannot

prevent it—or lower courts—from seeking to

distinguish the SEC context from the FTC context

based on the Court’s decision in Axon. Indeed, the

government recently tried this tack in analogous

circumstances.

Granting plenary review in this case and hearing

it alongside Axon is the only way to ensure that the

Court can fully resolve the circuit split and eliminate

the otherwise inevitable and unnecessary spin-off

litigation that would accompany an FTC-specific

decision in Axon—litigation that would add insult to

injury to litigants, like Cochran, who already have

been fighting for years for their day to present their

structural constitutional claims to a federal court.

Thus, as the Court has done in prior instances in

which the government has asked for a hold, the Court

should instead grant the government’s petition in this

case and set it for plenary review alongside Axon.

3

STATEMENT OF THE CASE

A.

Legal Background

1. The Dodd-Frank Wall Street Reform and

Consumer Protection Act of 2010 “dramatically

expanded” the authority of the SEC to impose

penalties administratively, making administrative

proceedings “essentially ‘coextensive with [the SEC’s]

authority to seek penalties in Federal court.’” Tilton

v. SEC, 824 F.3d 276, 279 (2d Cir. 2016) (alteration in

original) (citation omitted), cert. denied, 137 S. Ct.

2187 (2017). After Dodd-Frank, the SEC shifted its

enforcement efforts to its home court, where the

SEC’s own ALJs preside over cases. See Lucia v. SEC,

138 S. Ct. 2044, 2049 (2018); Press Release, SEC, SEC

Announces Enforcement Results for FY 2021 (Nov. 18,

2021), https://www.sec.gov/news/press-release/2021238 (addendum reporting that in fiscal year 2021, the

SEC brought nearly half of its enforcement

proceedings in its in-house tribunal before its own

ALJs).

This is hardly a coincidence. “[T]he SEC wins the

‘vast majority’ of the cases it brings through

administrative proceedings.” Pet. App. 28a n.15

(citation omitted). Indeed, the SEC fares far better

before its own ALJs than it does before Article III

judges. One study found that, between October 2010

and March 2015, the Commission won more than 90%

of cases it brought before its own ALJs, a rate

markedly higher than its 69% success rate in federal

court over the same period. Jean Eaglesham, SEC

Wins with In-House Judges, Wall St. J. (May 6, 2015),

https://on.wsj.com/3L4cPUN.

In presiding over these in-house proceedings, SEC

ALJs wield “extensive powers” nearly coextensive

4

with those possessed by “federal trial judges.” Lucia,

138 S. Ct. at 2049, 2053. Once the proceedings

conclude, ALJs issue publicly available “decisions

containing factual findings, legal conclusions, and

appropriate remedies.” Id. at 2053. As a result of

their expansive powers, this Court has held that SEC

ALJs “are ‘Officers of the United States,’ subject to the

Appointments Clause.” Id. at 2053-55.

Nevertheless, SEC ALJs are separated from the

oversight and removal of the Chief Executive by

multiple “layers of good-cause tenure” protection.

Free Enter. Fund v. Public Co. Acct. Oversight Bd.,

561 U.S. 477, 496-97 (2010). At a minimum, there are

two layers of protection from removal: ALJs can be

removed “only for good cause established and

determined by the Merit Systems Protection Board

[(MSPB)],” 5 U.S.C. § 7521(a), and MSPB officials are

removable by the President “only for inefficiency,

neglect of duty, or malfeasance in office,” id.

§ 1202(d). This scheme thus establishes at least “dual

for-cause limitations” on ALJs’ removal. Free Enter.

Fund, 561 U.S. at 492.

2. The Exchange Act prescribes a process for

administrative review that, for most, is “difficult” to

“navigat[e].” Pet. App. 28a n.15. Parties can petition

the Commission for “discretionary” review of adverse

ALJ decisions.

15 U.S.C. § 78d-1(b).

If the

Commission declines review, “the ALJ’s decision itself

‘becomes final’ and is ‘deemed the action of the

Commission.’” Lucia, 138 S. Ct. at 2054 (citations

omitted). But even when the Commission grants

review, it typically defers to the ALJ’s “‘findings of

fact,’” and when the “factfinding derives from

credibility judgments, as it frequently does,

acceptance [by the Commission] is near-automatic.”

5

Id. at 2054-55 (citation omitted); see also Eaglesham,

supra (noting that the Commission adopted the ALJ’s

factual findings 95% of the time).

A party “aggrieved by a final order of the

Commission” “may” seek judicial review of that order

in a federal court of appeals by filing a petition for

review. 15 U.S.C. § 78y(a)(1). “On the filing of the

petition,” the court of appeals “has jurisdiction, which

becomes exclusive on the filing of the record, to affirm

or modify and enforce or to set aside the order in

whole or in part.” Id. § 78y(a)(3). But the sanctions

imposed by the SEC do not await judicial review.

Absent a stay—which typically is difficult to obtain—

the SEC can collect any monetary penalties as well as

suspend an individual’s professional licenses and,

accordingly, upend his or her livelihood, all before the

individual ever sees the inside of an Article III court.

See id. § 78y(c)(2); SEC Rule of Practice 102(e)(1); see

also, e.g., In re Southeast Invs., N.C., Inc., Exchange

Act Release No. 86097, 2019 WL 2448245, at *2 (June

12, 2019) (describing a stay as an “extraordinary

remedy” (citation omitted)).

Because it can take years to get to this point, at

enormous financial cost and personal burden, many

individuals—despite vigorously contesting their

guilt—face “tremendous pressure to settle with the

SEC” and try to rebuild their lives before they get to

a federal court. Pet. App. 68a-70a (Oldham, J.,

concurring). As a result, most individuals never have

an opportunity to present their claims to an Article III

court, even when they dispute the authority of the

decisionmaker. See id. at 28a n.15 (majority opinion).

In Free Enterprise Fund, this Court concluded that

this same administrative review scheme did not

“strip” federal district courts of their jurisdiction over

6

“an Appointments Clause or separation-of-powers

claim” challenging the authority of the Public

Company Accounting Oversight Board, another body

of inferior officers exercising authority under the

SEC. 561 U.S. at 487-91 & n.2. As the Court

explained, this review scheme “does not expressly

limit the jurisdiction that other statutes confer on

district courts.” Id. at 489. Likewise, the Court held,

it does not do so “implicitly” under Thunder Basin—

the “‘statutory scheme’” does not “display[] a ‘fairly

discernible’ intent to limit jurisdiction,” and claims

challenging

the

constitutional

authority

of

decisionmakers are not “‘of the type Congress

intended to be reviewed within th[e] statutory

structure.’” Id. at 489-91 (second alteration in

original) (quoting Thunder Basin, 510 U.S. at 207,

212).

B. Factual Background

Michelle Cochran is a CPA licensed in Texas.

From 2007 to 2013, Cochran worked for a small

accounting firm called The Hall Group, which

performed auditing work for non-profits, privately

held companies and a few small, publicly traded

companies. Initially hired as an hourly employee,

Cochran became a non-equity partner in 2012 when

the firm’s principal, David Hall, made it a condition

of her continued employment. The atmosphere at the

firm was unpleasant and stressful, exacerbated by

Hall’s difficult and unprofessional demeanor.

Cochran resigned from the firm in July 2013. Compl.

¶¶ 16-23, D. Ct. Doc. 1 (Jan. 18, 2019).

In April 2016, almost three years after Cochran

left the Hall Group, the SEC filed an Order

Instituting Proceedings against David Hall, his firm,

7

Cochran, and another accountant. The SEC claimed

that Cochran violated the Exchange Act by failing to

comply with certain auditing documentation

requirements, e.g., the failure to sufficiently complete

various auditing checklists. Id. ¶¶ 24-27; see In re

David S. Hall, P.C., Exchange Act Release No. 77718,

2016 WL 1665164 (Apr. 26, 2016).

Consistent with its preference to litigate before its

in-house tribunal, the SEC elected to proceed

administratively rather than in federal court. The

case was assigned to an ALJ who, like other SEC

ALJs, had not been properly appointed for purposes

of the Appointments Clause. The ALJ issued multiple

orders and presided over a hearing at which Cochran

appeared pro se. Compl. ¶¶ 32-40. Following the

hearing, the ALJ issued a decision ruling against

Cochran, imposing a $22,500 penalty and a five-year

ban from practicing before the SEC. Pet. App. 2a-3a.

Cochran petitioned the Commission for review.

The Commission, however, vacated the ALJ’s

decision, and all of the proceedings before it, in light

of this Court’s decision in Lucia, which held that the

remedy for an “adjudication tainted with an

appointments violation” is a new proceeding before a

different and properly appointed official. 138 S. Ct. at

2055; see Pet. App. 3a. More than two years after the

SEC first instituted proceedings, Cochran was

assigned to undergo additional administrative

proceedings before a new ALJ, which are still

pending. Pet. App. 3a; Compl. ¶ 51.

C. Proceedings Below

1. In January 2019, Cochran filed suit against the

SEC in the Northern District of Texas. Pet. App.

140a. Cochran sought declaratory and injunctive

8

relief based on constitutional deficiencies in the SEC’s

administrative proceedings. Id. Relevant here,

Cochran claimed that SEC ALJs cannot preside over

the proceedings because they are unconstitutionally

insulated from removal by a multilayer for-cause

structure, analogous to the structure this Court held

unconstitutional in Free Enterprise Fund. Id. at 3a.

The district court dismissed the case for lack of

jurisdiction. Id. at 139a-44a. The court concluded

that the Exchange Act’s administrative review

scheme implicitly strips district courts of jurisdiction

to hear challenges to ongoing SEC enforcement

proceedings. Id. at 142a-44a. But in reaching that

conclusion, the court found it “deeply concern[ing]”

that Cochran, having endured one full proceeding

“before an ALJ who was not constitutionally

appointed,” would have to endure yet another round

of proceedings, “undoubtedly at considerable expense

and stress, before another unconstitutionally

appointed administrative law judge.” Id. at 143a.

2. Cochran appealed, and a divided panel of the

Fifth Circuit affirmed. Id. at 114a-38a.1 The panel

majority held that, in enacting the Exchange Act’s

scheme for administrative review of final SEC orders

contained in 15 U.S.C. § 78y, Congress “implicitly”

stripped federal district courts of jurisdiction over

structural constitutional challenges. Id. at 114a-15a,

117a.

The majority reasoned that Section 78y

“exhibits a general intent to deprive district courts of

subject matter jurisdiction,” id. at 118a-19a; and that,

based on the “Thunder Basin factors,” “Congress

1

A motions panel of the Fifth Circuit enjoined the SEC

administrative proceedings pending Cochran’s appeal. See Pet.

App. 4a.

9

intended to funnel the kind of claim Cochran asserts

through the statutory review scheme,” id. at 119a31a.

Judge Haynes dissented in relevant part,

concluding that, “like the [claim] in Free Enterprise

Fund,” Cochran’s “structural removal claim is not the

type [of claim] over which Congress intended to limit

jurisdiction” of federal district courts. Id. at 132a-38a.

3. The Fifth Circuit granted rehearing en banc

and reversed in relevant part. Id. at 1a-111a.

The en banc court held that Congress did not

“implicitly strip[] district courts of jurisdiction to hear

structural constructional claims under § 78y.” Id. at

5a-32a. First, the court held that “the text of § 78y”

does “not explicitly or implicitly strip the district court

of jurisdiction over Cochran’s claim.” Id. at 5a-10a.

Second, the court held that this Court’s decision in

Free Enterprise Fund is “enough to decide this case,”

as that decision “rejected the precise argument the

SEC makes here—that the Exchange Act divests

district courts of jurisdiction over removal power

challenges.” Id. at 10a-16a. Because “Free Enterprise

Fund is squarely on point,” that decision “foreclos[es]

any possibility that § 78y strips district courts of

jurisdiction

over

structural

constitutional

challenges.” Id. at 10a.

The court also held that it would reach the same

result under a fresh application of “the so-called

‘Thunder Basin factors.’” Id. at 16a-32a. As the Court

explained, (1) “Cochran’s removal power claim is

wholly collateral to the Exchange Act’s statutoryreview scheme,” id. at 21a-22a; (2) “Cochran’s

removal power claim is outside the SEC’s expertise,”

id. at 22a-23a; and (3) “the Exchange Act’s statutory-

10

review scheme threatens to deprive Cochran of the

opportunity for meaningful judicial review,” id. at

23a-31a. “Therefore,” the court concluded, “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.” Id. at 31a-32a.2

Judge Oldham, joined by five other judges, issued

a concurring opinion detailing the relevant history of

the SEC and its scheme for administrative review,

describing the tremendous burdens imposed by that

scheme on SEC targets, and responding to several

points raised by the dissent. Id. at 35a-81a.

Judge Costa, joined by six other judges, dissented.

Id. at 82a-111a. He reasoned that Congress intended

to create “an exclusive review scheme” in Section 78y

that implicitly strips district courts of jurisdiction, id.

at 85a-94a; and that “the separation-of-powers claim

Cochran asserts is of the type that Congress meant to

exclude from district court jurisdiction when it

created the SEC-specific scheme,” id. at 94a-111a. In

an effort to reconcile his conclusions with Free

Enterprise

Fund,

Judge

Costa

drew

an

“investigation/enforcement distinction” under which

district courts have jurisdiction during “an [SEC]

investigation” but lose jurisdiction once the SEC has

decided to pursue an “enforcement proceeding.” Id. at

99a-104a.

4. On January 24, 2022—three weeks after the

Fifth Circuit’s decision in this case—this Court

granted certiorari in Axon Enterprise, Inc. v. FTC, 142

2

The court also rejected the SEC’s ripeness argument, Pet.

App. 32a-34a, which the government has abandoned in its

petition for certiorari.

11

S. Ct. 895 (2022) (No. 21-86), which presents the

essentially same question in the context of the

administrative review scheme under the FTC Act. On

March 11, 2022, the government filed the petition for

certiorari in this case asking the Court to hold this

case pending this Court’s decision in Axon and dispose

of it as appropriate in light of that decision.

ARGUMENT

The petition should be granted and the case set for

plenary review by this Court. The circuits are split on

the precise question presented by the petition:

whether the Exchange Act’s administrative review

scheme implicitly strips district courts of jurisdiction

over structural constitutional claims. That question

is important to the hundreds of litigants ensnared in

SEC

administrative

proceedings

before

unconstitutionally insulated ALJs. And this Court

has already granted review in Axon Enterprise, Inc. v.

FTC, 142 S. Ct. 895 (2022) (No. 21-86), which presents

the same question in the context of the FTC Act’s less

frequently used administrative review scheme.

The government’s request that the Court hold the

petition pending a decision in Axon should be denied.

The Court should instead grant plenary review in this

case and consolidate it with Axon for argument next

fall. Doing so is the only way for the Court to fully

resolve the circuit split, which arises in the context of

the Exchange Act’s statutory scheme; ensure that the

precedent in circuits across the country currently

barring federal district court review in the SEC

context is conclusively overturned by the Court’s

decision; and guarantee that individuals like Cochran

are not forced to engage in protracted collateral

litigation in the lower courts over the reach of Axon to

12

the Exchange Act. Thus, the petition should be

granted, and the case should be considered alongside

Axon.3

I. THE QUESTION PRESENTED IS UNDENIABLY

CERTWORTHY

In the decision below, the Fifth Circuit, sitting en

banc, correctly held that the Exchange Act does not

implicitly strip federal district courts of jurisdiction

over structural constitutional challenges to the

authority of SEC ALJs. Pet. App. 2a. By filing a

petition for certiorari in this case, the government

necessarily maintains that this question merits this

Court’s review. And Cochran agrees.

First, as the government observes, the circuits are

split on the precise question presented here. Pet. 6.

Several circuits have held that the Exchange Act

implicitly strips federal courts of their jurisdiction to

hear structural constitutional claims. See Bennett v.

SEC, 844 F.3d 174, 188 (4th Cir. 2016); Hill v. SEC,

825 F.3d 1236, 1241 (11th Cir. 2016); Tilton v. SEC,

824 F.3d 276, 291 (2d Cir. 2016), cert. denied, 137 S.

Ct. 2187 (2017); Bebo v. SEC, 799 F.3d 765, 767 (7th

Cir. 2015), cert. denied, 577 U.S. 1236 (2016); see also

Jarkesy v. SEC, 803 F.3d 9, 17-18 (D.C. Cir. 2015)

(reaching same conclusion in a case raising a

constitutional “non-delegation challenge”). The Fifth

Circuit openly disagreed with those circuits in the en

banc decision below, joining numerous other judges

who have done so. Pet. App. 13a-15a; see Pet. App.

3 If the Court grants certiorari, the Court could order that

this case be consolidated for oral argument with Axon next fall,

or treat the cases as separate companion cases and consider

them “in tandem.” See Stephen M. Shapiro et al., Supreme Court

Practice § 14.6, at 14-21 (11th ed. 2019).

13

132a (panel opinion) (Haynes, J., dissenting in part);

Tilton, 824 F.3d at 292 (Droney, J., dissenting).4 The

Fifth Circuit also noted that its view aligned with

Judge Bumatay’s dissent from the Ninth Circuit’s

panel decision in Axon, a case “addressing a different

statute” (the FTC Act) in which he concluded that it

did not strip federal courts of jurisdiction over “the

plaintiff’s removal power claim.” Pet. App. 15a (citing

Axon Enter., Inc. v. FTC, 986 F.3d 1173, 1196 (9th Cir.

2021) (Bumatay, J., concurring in the judgment in

part and dissenting in part), cert. granted, 142 S. Ct.

895 (2022)).

Second, this is an undeniably “important

jurisdictional issue.”

Id. at 111a (Costa, J.,

dissenting). Indeed, the fact that so many circuits—

including those hearing the lion’s share of securities

enforcement actions—have already weighed in on this

issue underscores its national significance. That will

not subside. Since Dodd-Frank expanded the SEC’s

ability to try cases before its in-house administrative

tribunal, the SEC has increasingly brought

enforcement actions before its own ALJs, where it

enjoys a home-court advantage. See supra at 3-5. As

a result, individuals are currently forced to litigate in

a distinctly hostile forum, at great expense, before

they can challenge the constitutional legitimacy of the

decisionmaker

presiding

over

their

agency

proceedings. And this administrative process can

4 See also Duka v. SEC, 103 F. Supp. 3d 382, 390 (S.D.N.Y.

2015); Gray Fin. Grp., Inc. v. SEC, 166 F. Supp. 3d 1335, 134344 (N.D. Ga. 2015), vacated sub nom. Hill, 825 F.3d 1236 (11th

Cir. 2016); Ironridge Glob. IV, Ltd. v. SEC, 146 F. Supp. 3d 1294,

1303-04 (N.D. Ga. 2015); Hill v. SEC, 114 F. Supp. 3d 1297, 1306

(N.D. Ga. 2015), vacated, 825 F.3d 1236 (11th Cir. 2016); Gupta

v. SEC, 796 F. Supp. 2d 503, 512-13 (S.D.N.Y. 2011).

14

often drag on for many years—far longer than

average for district court proceedings. For instance,

the administrative proceedings against the plaintiff

in the Seventh Circuit’s Bebo decision—which is the

oldest case in the circuit split—have lasted for more

than seven years and are still ongoing. See In re Bebo,

Admin. Proc. No. 3-16293 (S.E.C.) (instituted Dec. 3,

2014). Other SEC targets have similarly found their

administrative proceedings languishing on the SEC’s

docket. See, e.g., In re John Thomas Cap. Mgmt. Grp.

LLC, Admin. Proc. No. 3-15255 (S.E.C.) (seven years

and six months); In re Gibson, Admin. Proc. No. 317184 (S.E.C.) (six years; still ongoing).

This regime exacts an enormous personal,

reputational, and financial toll on respondents before

they can ever present their constitutional claim to a

federal court. See Tilton, 824 F.3d at 298 n.5 (Droney,

J., dissenting). And the SEC has exploited this

vulnerability in “a number of cases” by “threaten[ing]

administrative proceedings” before its ALJs in a

calculated effort to compel a settlement. Id. (citation

omitted); see Pet. App. 69a (Oldham, J., concurring).

That is, the agency has appeared to wield the process

as a punishment. The enormous burdens that

Cochran has faced in attempting to secure federal

court review of her constitutional claim epitomize the

hardships that individuals face in these proceedings.

As the district court explained, this state of affairs

is “deeply concern[ing]” to say the least. Pet. App.

143a. It is thus not surprising that the Fifth Circuit

convened en banc to address this important and

frequently recurring issue. And, of course, the

significance of the question presented is further

underscored by this Court’s grant of certiorari in

15

Axon, which presents the same jurisdictional issue in

the context of proceedings under the FTC Act.

II. THE COURT SHOULD GRANT REVIEW

CONSIDER THIS CASE ALONGSIDE AXON

AND

The government asks the Court to hold the

petition in this case for Axon. Pet. 7. For several

reasons, however, that proposal is unsound. While

the questions presented in Axon and this case

unquestionably overlap, it is critical for this Court to

grant plenary review in this case and consolidate it

with Axon for disposition on the merits. See Sup. Ct.

R. 27.3; Stephen M. Shapiro et al., Supreme Court

Practice § 14.6, at 14-19 to -21 & n.33 (11th ed. 2019).

A. Although this Court frequently holds certiorari

petitions pending a decision in a case presenting a

substantially identical issue, it also has recognized

that there are instances where, as here, granting

plenary review and consolidating the case with an

already-granted case pending on the merits docket is

appropriate. See, e.g., Crawford v. Martinez, 540 U.S.

1217 (2004) (No. 03-878) (granting the government’s

petition for certiorari, despite the government’s

request only for a hold, and consolidating with

previously granted case).

That treatment is

warranted here for several reasons.

1. First, the question presented in Axon is by its

terms confined to the FTC context:

“Whether

Congress impliedly stripped federal district courts of

jurisdiction over constitutional challenges to the

Federal Trade Commission’s structure, procedures,

and existence by granting the courts of appeals

jurisdiction to ‘affirm, enforce, modify, or set aside’

the Commission’s cease-and-desist orders.” Axon Pet.

i. To be sure, the resolution of that question may bear

16

on the availability of federal judicial review in similar

circumstances in the SEC context. But the Court’s

decision in Axon will necessarily be constrained by the

actual question presented. See Sup. Ct. R. 14.1(a)

(“Only the questions set out in the petition, or fairly

included therein, will be considered by the Court.”);

cf. Yee v. City of Escondido, 503 U.S. 519, 535-37

(1992) (explaining that “[t]he framing of the question

presented has significant consequences” and refusing

to consider “a question related to the one petitioners

presented, and perhaps complementary to the one

petitioners presented, [because] it [was] not ‘fairly

included therein’”).5 The Court’s decision in Axon, in

other words, will not actually resolve the question

presented by this case, which is explicitly framed in

the specific context of the “Securities and Exchange

Commission.” Pet. i. Granting review in this case and

consolidating it with Axon will ensure that the Court’s

decision directly addresses the jurisdictional question

in the SEC context.

Doing so is critical because the jurisdictional issue

has arisen most frequently in the SEC context, and

the circuit split arose in that context. See Pet. 6.

Other than the Ninth Circuit’s decision in Axon, each

of the cases in the circuit split—including this case—

has arisen in the SEC context. See Pet. App. 2a (5th

Cir.); Bennett, 844 F.3d 174 (4th Cir.); Hill, 825 F.3d

1236 (11th Cir.); Tilton, 824 F.3d 276 (2d Cir.); Bebo,

799 F.3d 765 (7th Cir.); Jarkesy, 803 F.3d 9 (D.C.

5 The question whether the Exchange Act strips federal

courts of jurisdiction to hear structural constitutional claims is

related to the question in Axon, but it is not fairly included

within that question because, as explained, the cases involve

different statutes. See Yee, 503 U.S. at 535-37.

17

Cir.). The only way to ensure that the Court’s decision

resolves that conflict in all of those circuits is to grant

plenary review and decide this case alongside Axon.

Moreover, as the government itself has argued, the

“framework” driving the analysis in these cases is

tethered to the specific “‘statutory scheme of

administrative and judicial review’” at issue. Br. in

Opp. 7-8, Axon, supra (No. 21-86) (Axon Br. in Opp.)

(citation omitted). This Court’s cases have also

grounded their analyses of the question in the specific

statutory scheme at issue, explaining that

“[p]rovisions for agency review do not restrict judicial

review unless the ‘statutory scheme’ displays a ‘fairly

discernible’ intent to limit jurisdiction, and the claims

at issue ‘are of the type Congress intended to be

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

Enter. Fund v. Public Co. Acct. Oversight Bd., 561

U.S. 477, 489 (2010) (emphases added) (quoting

Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 207,

212 (1994)); see Elgin v. Department of the Treasury,

567 U.S. 1, 10 (2012) (“To determine whether it is

‘fairly discernible’ that Congress precluded district

court jurisdiction over petitioners’ claims, we examine

the CSRA’s text, structure, and purpose.” (emphasis

added)). Consistent with that directive, the Fifth

Circuit in this case “start[ed]” its analysis “with the

statutory text” contained in the Exchange Act, the

specific statutory scheme at issue here. Pet. App. 7a

(citation omitted); see also id. at 35a (Oldham, J.,

concurring) (“‘[O]ur inquiry begins with the statutory

text, and ends there as well if the text is

unambiguous.’ Here, the text is as unambiguous as

can be.” (citation omitted)).

The FTC Act and the Exchange Act are obviously

“different statute[s],” id. at 15a (majority opinion),

18

with different histories and purposes enforced by

different agencies. See id. at 47a-73a (Oldham, J.,

concurring) (recounting the unique history and

nuances of the SEC’s administrative regime). Even

though many of the key provisions are, as the

government asserts, “materially identical,” Pet. 6,

there are some distinctions that could affect the

analysis. For example, Axon observes that the FTC

Act “specifically addresses only FTC ‘cease and desist’

orders, 15 U.S.C. § 45(c)-(d), whereas the SEC Act

governs judicial review of any ‘final order of the’ SEC,

id. § 78y.” Axon Pet. 21. In Axon’s view, this

distinction “cuts in favor of reading the FTC Act more

narrowly when it comes to jurisdiction-stripping.” Id.

And, indeed, this statutory difference is baked into

the question presented in Axon, which refers to the

grant of jurisdiction to overturn the FTC’s “cease-anddesist orders.” Id. at i. The government disagrees

with this argument. See Axon Br. in Opp. 9 n.*. But

in the event the Court agrees with Axon, the

government or lower courts could seize on that

distinction (or any other) in attempting to bar federal

court jurisdiction in the SEC context. To eliminate

the concern, the Court should simply resolve the

question in the SEC context now.

There are also statutory distinctions that arguably

cut in favor of reading the Exchange Act more

narrowly for purposes of jurisdiction-stripping. For

example, the Fifth Circuit explained that the verb

“becomes” in the Exchange Act’s judicial-review

provision—which specifies when jurisdiction in the

court of appeals “‘becomes exclusive’”—“necessarily

implies a transformation,” such that the court of

appeals’ jurisdiction becomes “exclusive” only “after a

petition is filed.” Pet. App. 9a & n.6 (quoting 15

19

U.S.C. § 78y(a)(3)). The court “contrast[ed]” that

language with other formulations that do not use

“becomes,” such as a statute providing “that

jurisdiction ‘is exclusive,’ or that the court of appeals

‘has exclusive jurisdiction.’” Id. at 9a n.6. Like those

other formulations, the analogous provision in the

FTC Act does not use the word “becomes.” See 15

U.S.C. § 45(d) (“[T]he jurisdiction of the court of

appeals . . . shall be exclusive.” (emphasis added)).

The SEC scheme also explicitly preserves “any and

all” other avenues of relief. Id. § 78bb(a)(2) (“Except

as provided in subsection (f) [concerning class

actions], the rights and remedies provided by this

chapter shall be in addition to any and all other rights

and remedies that may exist at law or in equity.”).

The point here is not that one case—Axon or

Cochran—is necessarily stronger (in Cochran’s view,

the plaintiffs should prevail in both cases), but that

there are statutory differences that could bear on the

Court’s resolution of the issue in Axon—and the

government’s response to an adverse decision in Axon

in the SEC context.

The differences between the statutory schemes

also bear on the force of this Court’s precedent in

resolving the questions presented. As the Fifth

Circuit explained, this Court “already rejected the

SEC’s precise jurisdictional argument under § 78y” in

Free Enterprise Fund. Pet. App. 5a, 10a-13a. “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.” Id. at 12a. And

because “Free Enterprise Fund is squarely on point,”

20

it “foreclos[es] any possibility that § 78y strips district

courts of jurisdiction over structural constitutional

challenges.” Id. at 10a; see also id. at 2a n.2 (“Judge

Willett concurs in the judgment because he believes

this case is controlled by Free Enterprise Fund . . . .”).

To be sure, Axon makes a compelling argument

that Free Enterprise Fund’s reasoning is equally

applicable to the FTC Act’s statutory regime. See

Axon Pet. 20-28. But the precedential force of Free

Enterprise Fund is plainly different (and stronger) in

the SEC context—because Free Enterprise Fund itself

arose in the SEC context. Indeed, the Fifth Circuit

held that Free Enterprise Fund “is enough to decide

this case” as a matter of “control[ling]” precedent,

regardless of the Thunder Basin factors. Pet. App.

13a-16a. This distinction provides yet another reason

for the Court to grant review in this case and directly

answer the question in the SEC context.

2. There also is an imperative practical reason for

granting plenary review in this case. Holding this

case pending Axon—rather than granting review and

consolidating the cases—would unnecessarily deprive

the many litigants currently ensnared in SEC

proceedings of a much-needed ruling by this Court

squarely addressing the question presented in the

SEC context. Granting review would eliminate any

need for further rounds of litigation in the lower

courts sorting out the application of the Court’s

decision in Axon to the SEC context.

As noted, the circuit split arises in the context of

the Exchange Act, and several circuits have decided

the issue in the SEC’s favor. See supra at 12-13. A

decision by this Court addressing solely the FTC Act,

however, will not automatically negate adverse

circuit precedent concerning the Exchange Act.

21

Rather, plaintiffs in those circuits will have to litigate

the issue on a circuit-by-circuit basis, battling with

the government and lower-court judges over the

frequently “difficult question of when a three-judge

panel may reexamine normally controlling circuit

precedent in the face of an intervening United States

Supreme Court decision.” Miller v. Gammie, 335 F.3d

889, 892-93 (9th Cir. 2003) (en banc); see, e.g., Taylor

v. Grubbs, 930 F.3d 611, 619 (4th Cir. 2019) (“‘We do

not lightly presume that the law of the circuit has

been overturned,’ . . . [and] circuit precedent ‘controls’

where [the] Supreme Court did not directly contradict

our prior holding[].” (citation omitted) (emphasis

added)); Technical Automation Servs. Corp. v. Liberty

Surplus Ins. Corp., 673 F.3d 399, 405 (5th Cir. 2012)

(“[F]or a Supreme Court decision to change our

Circuit’s law, it ‘must be more than merely

illuminating with respect to the case before [the

court]’ and must ‘unequivocally’ overrule prior

precedent.” (alteration in original) (emphasis added)).

Thus, even if, as the government now asserts, the

statutory schemes are “materially identical,” Pet. 6,

such that a decision from this Court in favor of Axon

should call for the precedent in those circuits to be

overturned, a decision limited to the FTC Act will only

delay the actual resolution of the circuit split while

needlessly increasing the litigation costs for plaintiffs,

the government, and the lower courts.

Assurances today—in advance of a decision by this

Court—cannot prevent the instinct to litigate over

any arguable nuances or distinctions based on the

reasoning of the decision. Such pie-crust promises are

easily made—and easily broken.

And recent

experience involving a similar instance of “materially

identical” statutes underscores that this concern is

22

real. In Babb v. Wilkie, 140 S. Ct. 1168 (2020), this

Court addressed the causation standard for federalsector claims under the Age Discrimination in

Employment Act (ADEA).

In this Court, the

government asserted—repeatedly—that the federalsector provision in the ADEA is “materially identical”

to the federal-sector provision in Title VII. Gov’t Cert.

Resp. 12, 22, 24, Babb, supra (No. 18-882). After the

government lost in Babb, however, it argued on

remand that this Court’s decision in Babb was

“limited to ADEA claims,” and that pre-Babb circuit

precedent construing the admittedly “materially

identical” Title VII provision was still “binding” on the

panel, even though it flatly conflicted with Babb.

Gov’t Suppl. Br. 8-11, Babb v. Secretary, Dep’t of

Veterans Affairs, No. 16-16492 (11th Cir. Oct. 22,

2020).

Indeed, the government specifically pointed to the

fact that the question presented in Babb was framed

in terms of the ADEA, just as the question in Axon is

framed in terms of the FTC Act. See id. at 1 (“Because

the Supreme Court granted certiorari in this case

limited to plaintiff’s [ADEA] claim, the panel remains

bound by circuit precedent . . . governing the

causation standard for Title VII retaliation claims.”).

The government further argued that the pre-Babb

circuit precedent would “remain[] binding” as to Title

VII “absent en banc or Supreme Court” correction. Id.

at 10. The court of appeals initially took a similar

view by limiting the reach of this Court’s decision to

the ADEA, Babb v. Secretary, Dep’t of Veterans

Affairs, 802 F. App’x 548, 548 (11th Cir. 2020), and

only reversed itself after soliciting additional briefing

and conducting an extended analysis of the circuit’s

“prior-panel-precedent rule,” Babb v. Secretary, Dep’t

23

of Veterans Affairs, 992 F.3d 1193, 1198-1204 (11th

Cir. 2021). That burdensome scenario could play out

in multiple circuits across the country if the Court

does not grant plenary review in this case.

Thus, while the government maintains in its

certiorari petition that the statutory review schemes

under the FTC Act and the Exchange Act are

“materially identical,” Pet. 6, that assertion will not

prevent the government from urging lower courts to

ignore an FTC-specific decision from this Court in

Axon in favor of pre-Axon, SEC-specific circuit

precedent. Indeed, for decades, the government has

demonstrated nothing but resolve and tenacity in

seeking to prevent individuals like Cochran from

getting a hearing in federal court on their structural

constitutional claims while their administrative

proceedings inch forward at a glacial pace. Granting

review in this case alongside Axon will eliminate that

risk and curtail needless litigation over the scope of

this Court’s decision.

3. Granting review in this case also will give the

Court the full benefit of the Fifth Circuit’s considered

views on the issues at stake. Judge Haynes’ opinion

for the en banc court carefully explains why its

reasoning better adheres to the statutory text and

this Court’s precedent. Pet. App. 1a-34a. Judge

Costa’s dissenting opinion ventilates the opposing

position. Id. at 82a-111a. And Judge Oldham’s

compelling concurrence describing the origins of the

administrative state, and the SEC in particular,

develops several historical and practical points

further supporting the existence of federal court

jurisdiction in this context. Id. at 35a-81a.

In addition, hearing both this case and Axon

together would give the Court a more complete

24

understanding of the circumstances in which this

question has arisen and the practical impact of the

jurisdiction-stripping rule on plaintiffs seeking their

day in federal court. That additional background may

be particularly salient in that the plaintiff in this case

is an individual, rather than a corporation, which

puts this case on the same footing as the vast majority

of cases that have arisen presenting this issue.

B. For these reasons, there is a compelling need

for this Court to grant plenary review in this case and

decide it alongside Axon. And because the Axon case

will not be argued until next Term, this case can be

briefed and considered with Axon without delaying

the Court’s resolution of the cases.

The Court will not hear argument in Axon until

October 2022 at the earliest—more than six months

from now. This case easily can be briefed during that

period and readied for argument in October 2022.

Under the current schedule, Axon’s opening brief is

due on May 9, and the FTC’s response brief is due on

August 8. The Court could simply allow this case to

be briefed on a separate track according to the

customary deadlines. But as in prior consolidated

cases, the Court also could (1) coordinate the briefing

schedules in this case and Axon so that the

government files its opening brief in this case at the

same time it files its respondent’s brief in Axon,6 or

(2) realign the parties in this case so that respondent

Cochran would file an opening brief in time for the

government to file a single response brief addressing

6 See, e.g., Benitez v. Rozos, No. 03-7434 (May 7, 2004), and

Clark v. Martinez, No. 03-878 (May 7, 2004) (government filing

its brief as respondent in No. 03-7434 and its opening brief as

petitioner in No. 03-878 on the same day).

25

both statutory schemes, if it wishes to do so.7 But

under any of these alternatives, this case could be

briefed and set for argument alongside Axon during

the October sitting.

The bottom line is that there is simply no reason

to hold this case for Axon, but there are numerous

compelling reasons to grant plenary review in this

case and consider it alongside Axon next fall.

*****

Michelle Cochran has already endured six years

waiting for review of her constitutional claim in

federal district court. Holding the government’s

petition in this case pending the Court’s consideration

of this issue in Axon under a different statute would

unnecessarily prolong Cochran’s time in the SEC

administrative holding cell and possibly force

plaintiffs in her position to have to litigate the impact

of Axon as to the Exchange Act, even if Axon prevails.

That situation is untenable and unnecessary. The

Court should grant certiorari in this case and decide

it alongside Axon to ensure that this important

jurisdictional question is resolved by this Court in the

most common context in which it arises—in the SEC

context—as soon as possible.

7

See, e.g., AMG Capital Mgmt., LLC v. FTC, No. 19-508

(Aug. 12, 2020) (order realigning parties to allow the government

to file a single brief as respondent).

26

CONCLUSION

The petition for a writ of certiorari should be

granted, and the case should be considered alongside

Axon Enterprise, Inc. v. FTC, No. 21-86.

Respectfully submitted,

MARGARET A. LITTLE

MARKHAM S. CHENOWETH

RICHARD A. SAMP

KARA M. ROLLINS

NEW CIVIL LIBERTIES

ALLIANCE

1225 19th Street, NW

Suite 450

Washington, DC 20036

GREGORY G. GARRE

Counsel of Record

MARGARET A. UPSHAW

BLAKE E. STAFFORD

LATHAM & WATKINS LLP

555 Eleventh Street, NW

Suite 1000

Washington, DC 20004

(202) 637-2207

gregory.garre@lw.com

Counsel for Respondent

March 29, 2022