Amicus Curiae 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 Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

____________________________________________________________________________________________________

BRIEF OF AMICUS CURIAE

AMERICANS FOR PROSPERITY FOUNDATION IN

SUPPORT OF RESPONDENT

————

Michael Pepson

Counsel of Record

Cynthia Fleming Crawford

AMERICANS FOR PROSPERITY FOUNDATION

1310 N. Courthouse Road, Ste. 700

Arlington, VA 22201

(571) 329-4529

mpepson@afphq.org

Counsel for Amicus Curiae

July 7, 2022

i

TABLE OF CONTENTS

Table of Authorities ...................................................... ii

Brief of Amicus Curiae in Support of Petitioner ........ 1

Interest of Amicus Curiae ............................................ 1

Summary of Argument ................................................. 2

Argument ....................................................................... 4

I.

The SEC Act Does Not Impliedly Strip

Jurisdiction Over Ms. Cochran’s Claims ............ 4

A. Courts Have Jurisdiction Over Constitutional

and Ultra Vires Challenges to SEC

Administrative Prosecutions ......................... 4

B. Case Law Does Not Bar the Courthouse Doors

to Constitutional Claims ................................ 9

C. District Courts Have Jurisdiction Over At

Least Some Ultra Vires Claims ................... 12

II.

D. The SEC Act and the FTC Act Should Be

Interpreted In Para Materia: Neither

Impliedly Shutters the Courthouse Doors.. 14

SEC’s

Rigged

Administrative

Process

Irreparably Harms Ms. Cochran....................... 15

III. The

SEC’s

Inhouse

Process

Deprives

Respondents of Any Opportunity For Fair and

Level Review ....................................................... 18

IV. SEC’s Unconstitutional Structure Threatens

Individual Liberty .............................................. 23

V.

Common Objections to Opening the Courthouse

Doors and Enforcing the Constitution Lack

Merit .................................................................... 30

Conclusion ................................................................... 32

ii

TABLE OF AUTHORITIES

Page(s)

Cases

Air Courier Conference v. Am. Postal

Workers Union,

498 U.S. 517 (1991) ............................................... 13

American Gen. Ins. Co. v. FTC,

496 F.2d 197 (5th Cir. 1974) ................................ 13

AMG Capital Mgmt., LLC v. FTC,

141 S. Ct. 1341 (2021) ........................................... 31

Am. Sch. of Magnetic Healing v.

McAnnulty,

187 U.S. 94 (1902) ................................................. 13

Athlone Indus., Inc. v. Consumer Prod.

Safety Com.,

707 F.2d 1485 (D.C. Cir. 1983)............................. 12

Austin v. Shalala,

994 F.2d 1170 (5th Cir. 1993) .............................. 31

Axon Enter. v. FTC,

986 F.3d 1173 (9th Cir. 2021) ........................ 14, 17

B&B Hardware, Inc. v. Hargis Indus.,

575 U.S. 138 (2015) ............................................... 27

Bell v. Hood,

327 U.S. 678 (1946) ................................................. 4

iii

Bond v. United States,

564 U.S. 211 (2011) ............................................... 15

Calcutt v. Fed. Deposit Ins. Corp.,

No. 20-4303, 2022 U.S. App. LEXIS

15979 (6th Cir. June 10, 2022) ................. 14, 24, 28

Cameron v. EMW Women’s Surgical

Center, P.S.C.,

142 S. Ct. 1002 (2022) ............................................. 5

Chamber of Commerce of the United

States v. Reich,

74 F.3d 1322 (D.C. Cir. 1996).............................. 13

City of Arlington v. FCC,

569 U.S. 290 (2013) ............................................ 24, 25

Cohens v. Virginia,

19 U.S. (6 Wheat.) 264 (1821) ................................ 8

Collins v. Yellen,

141 S. Ct. 1761 (2021) ................................. 8, 17, 25

Doe Co. v. Cordray,

849 F.3d 1129 (D.C. Cir. 2017)............................. 15

E.I. du Pont de Nemours & Co. v. FTC,

488 F. Supp. 747 (D. Del. 1980) ............................. 6

Elgin v. Department of Treasury,

567 U.S. 1 (2012) ....................................... 2, 5, 9, 10

iv

Enyart v. Nat’l Conference of Bar

Exam’rs, Inc.,

630 F.3d 1153 (9th Cir. 2011) ........................ 16, 17

Feltner v. Columbia Pictures Tv,

523 U.S. 340 (1998) ............................................... 28

Ferrero v. Associated Materials, Inc.,

923 F.2d 1441 (11th Cir. 1991) ............................ 16

Fleming v. USDA,

987 F.3d 1093 (D.C. Cir. 2021)............................... 9

Free Enterprise Fund v. Public Co.

Accounting Oversight Board,

561 U.S. 477 (2010) .............. 3, 7, 11, 17, 24, 25, 31

FTC v. Ruberoid Co.,

343 U.S. 470 (1952) ............................................... 25

FTC v. Standard Oil Co. of California,

449 U.S. 232 (1980) .........................4, 11, 12, 15, 16

Gebhart v. SEC,

595 F.3d 1034 (9th Cir. 2010) .............................. 23

Granfinanciera, S. A. v. Nordberg,

492 U.S. 33 (1989) ................................................. 29

Gupta v. SEC,

796 F. Supp. 2d 503 (S.D.N.Y. 2011) ................... 30

Henderson v. Shinseki,

562 U.S. 428 (2011) ................................................. 5

v

Housworth v. Glisson,

485 F. Supp. 29 (N.D. Ga. 1978) .......................... 16

Hubbard v. U.S. EPA, Adm’r,

809 F.2d 1 (D.C. Cir. 1986) ..................................... 5

Ironridge Global IV, Ltd. v. SEC,

146 F. Supp. 3d 1294 (N.D.Ga. 2015) .................. 11

Jarkesy v. SEC,

34 F.4th 446 (5th Cir. 2022) .........24, 25, 28, 29, 31

Leedom v. Kyne,

358 U.S. 184 (1958) ............................................... 13

Lexmark Int’l, Inc. v. Static Control

Components, Inc.,

572 U.S. 118 (2014) ................................................. 8

Lorenzo v. SEC,

872 F.3d 578 (D.C. Cir. 2017)................... 22, 23, 29

Lucia v. SEC,

138 S. Ct. 2044 (2018) ..................................... 22, 24

Marbury v. Madison,

5 U.S. (1 Cranch) 137 (1803) .................................. 5

Martin v. Hunter’s Lessee,

14 U.S. (1 Wheat.) 304 (1816) .............................. 24

Meadows v. SEC,

119 F.3d 1219 (5th Cir. 1997) .............................. 23

vi

Murray’s Lessee v. Hoboken Land &

Improvement Co.,

59 U.S. 272 (1856) ................................................. 27

New Orleans Pub. Serv., Inc. v. Council

of New Orleans,

491 U.S. 350 (1989) ................................................. 8

Nyunt v. Chairman, Broad. Bd. of

Governors,

589 F.3d 445 (D.C. Cir. 2009)............................... 10

Odebrecht Constr. v. Sec’y, Fla. DOT,

715 F.3d 1268 (11th Cir. 2013) ............................ 16

Oil States Energy Servs., LLC v.

Greene’s Energy Grp., LLC,

138 S. Ct. 1365 (2018) ............................... 27, 28, 29

Pepsico, Inc. v. FTC,

472 F.2d 179 (2d Cir. 1972) .................................. 13

Quackenbush v. Allstate Ins. Co.,

517 U.S. 706 (1996) ................................................. 8

Sackett v. EPA,

566 U.S. 120 (2012) ........................................... 7, 18

SEC v. Healthsouth Corp.,

261 F. Supp. 2d 1298 (N.D.Ala. 2003) ................. 20

Sec’y of Labor v. Knight Hawk Coal,

LLC Sterling Drug, Inc. v.

Weinberger,

991 F.3d 1297 (D.C. Cir. 2021)............................. 10

vii

Seila Law LLC v. Consumer Financial

Protection Bureau,

140 S. Ct. 2183 (2020) ........................................... 15

Sheldon v. Sill,

49 U.S. (8 How.) 441 (1850) .................................... 5

Stark v. Wickard,

321 U.S. 288 (1944) ............................................... 13

Sterling Drug, Inc. v. Weinberger,

509 F.2d 1236 (2d Cir. 1975) ................................ 13

Tilton v. SEC,

824 F.3d 276 (2d Cir. 2016) .................. 7, 15, 17, 19

Thunder Basin Coal Co. v. Reich,

510 U.S. 200 (1994) ................................. 2, 9, 10, 11

Touche Ross & Co. v. SEC,

609 F.2d 570 (2d Cir. 1979) .................................. 13

TransUnion LLC v. Ramirez,

141 S. Ct. 2190 (2021) ............................................. 4

Trudeau v. FTC,

456 F.3d 178 (D.C. Cir. 2006)................................. 4

Tull v. United States,

481 U.S. 412 (1987) ............................................... 28

United States v. Arthrex, Inc.,

141 S. Ct. 1970 (2021) ........................................... 29

viii

United States v. Fausto,

484 U.S. 439 (1988) ............................................... 10

United States v. Microsoft Corp.,

147 F.3d 935 (D.C. Cir. 1998)............................... 18

Wash. State Dep’t of Licensing v. Cougar

Den, Inc.,

139 S. Ct. 1000 (2019) ............................................. 6

Wellness Int’l Network, Ltd. v. Sharif,

575 U.S. 665 (2015) ............................................... 27

Willcox v. Consolidated Gas Co.,

212 U.S. 19 (1909) ................................................... 8

Williams v. Pennsylvania,

136 S. Ct. 1899 (2016) ........................................... 26

Winter v. NRDC, Inc.,

555 U.S. 7 (2008) ................................................... 30

Constitution

U.S. Const. Art. II, § 1, cl. 1 ....................................... 24

U.S. Const. Art. III, § 1 .............................................. 24

U.S. Const. Art. III, § 2 ................................................ 5

U.S. Const. amend. VII .............................................. 28

Statutes

5 U.S.C. § 702 ................................................................ 4

ix

5 U.S.C. § 703 ................................................................ 5

5 U.S.C. § 7521(a) ....................................................... 25

5 U.S.C. § 7521(b)(1)................................................... 25

15 U.S.C. § 78d-1(b) .................................................... 22

15 U.S.C. § 78d-1(c) .................................................... 22

15 U.S.C. § 78u-2(a) .................................................... 20

15 U.S.C. § 78y(a)(1) ................................................... 22

15 U.S.C. § 78y(a)(3) ..................................................... 6

15 U.S.C. § 78y(a)(4) ............................................. 22, 26

28 U.S.C. § 1331 ........................................................ 4, 7

28 U.S.C. § 1361 ............................................................ 4

28 U.S.C. § 1651(a) ................................................. 4, 14

28 U.S.C. § 2201 ........................................................ 4, 7

28 U.S.C. § 2202 ............................................................ 4

Regulations

17 C.F.R. § 201.360(d)(2) ............................................ 22

17 C.F.R. § 201.410 ..................................................... 21

x

Rules

Sup. Ct. Rule 37.3 ......................................................... 1

Other Authorities

Adam M. Katz,

Eventual Judicial Review,

118 Colum. L. Rev. 1139 (2018) ........................... 21

Andrew N. Vollmer, Accusers as

Adjudicators in Agency Enforcement

Proceedings,

52 U. Mich. J.L. Reform 103 (2018) ..................... 26

Antonin Scalia & Bryan Garner,

Reading Law (2012) ................................................ 6

Byse and Fiocca, Section 1361 of the

Mandamus and Venue Act of 1962

and “Nonstatutory” Judicial Review

of Federal Administrative Action,

81 Harv. L. Rev. 308 (1967).................................. 14

Chris Cox, The Growing Use of SEC

Administrative Proceedings

(May 13, 2015),

tinyurl.com/yyusqwh2 ........................................... 19

Comments of Andrew N. Vollmer on

Office of Mgmt. & Budget RFI,

OMB-2019-0006 (Mar. 9, 2020),

https://papers.ssrn.com/sol3/papers.c

fm?abstract_id=3551634....................................... 23

xi

David Zaring,

Enforcement Discretion at the SEC,

94 Tex. L. Rev. 1165 (2016) ............................ 19, 20

Drew Thornley & Justin Blount, SEC

In-House Tribunals: A Call for

Reform,

62 Vill. L. Rev. 261 (2017) .............................. 21, 22

Evan D. Bernick, Is Judicial Deference

to Agency Fact-Finding Unlawful?,

16 Geo. J.L. & Pub. Pol’y 27 (2018) ..................... 26

Gary Lawson, The Rise and Rise of the

Administrative State,

107 Harv. L. Rev. 1231 (1994) ............................. 23

Gideon Mark, SEC and CFTC

Administrative Proceedings,

19 U. Pa. J. Const. L. 45 (2016) ..................... 18, 20

Gideon Mark, Response: SEC

Enforcement Discretion,

94 Tex. L. Rev. Online 261 (2016) ....................... 21

Jean Eaglesham, SEC Wins with InHouse Judges, Wall Street Journal

(May 6, 2015) ................................................... 21, 22

xii

Jed S. Rakoff, U.S. Dist. Judge for the

S. Dist. of N.Y., PLI Securities

Regulation Institute Keynote

Address: Is the S.E.C. Becoming a

Law Unto Itself? (Nov. 5, 2014),

https://securitiesdiary.files.wordpres

s.com/2014/11/rakoff-pli-speech.pdf..................... 19

John Gibbons, Comment, Why Judicial

Deference to Administrative FactFinding is Unconstitutional,

2016 B.Y.U.L. Rev. 1485 (2016) ........................... 26

Linda Jellum, The SEC’s Fight to Stop

District Courts From Declaring Its

Hearings Unconstitutional,

101 Tex. L. R. (forthcoming 2022),

https://papers.ssrn.com/sol3/papers.c

fm?abstract_id=4041454......................................... 8

Luis Inaraja Vera, Delayed Judicial

Review of Agency Action,

56 Harv. J. on Legis. 199 (2019) .......................... 11

Mila Sohoni, Agency Adjudication and

Judicial Nondelegation: An Article

III Canon,

107 Nw. U.L. Rev. 1569 (2013) ............................ 31

Nathan S. Chapman & Michael W.

McConnell, Due Process as

Separation of Powers,

121 Yale L. J. 1672 (2012) .............................. 26, 27

xiii

Office of Inspector General, Report of

Investigation,

Case No. 15-ALJ-0482-1, (2016),

https://www.sec.gov/oig/reportspubs/

Final-Report-of-Investigation.pdf ........................ 21

OPM, ALJs By Agency (as of March

2017), https://www.opm.gov/servicesfor-agencies/administrative-lawjudges/#url=ALJs-by-Agency .............................. 32

1

BRIEF OF AMICUS CURIAE

IN SUPPORT OF PETITIONER

Under Supreme Court Rule 37.3, Americans for

Prosperity Foundation (“AFPF”) respectfully submits

this amicus curiae brief in support of Respondent.1

INTEREST OF AMICUS CURIAE

Amicus curiae AFPF is a 501(c)(3) nonprofit

organization committed to educating and training

Americans to be courageous advocates for the ideas,

principles, and policies of a free and open society. As

part of this mission, it appears as amicus curiae before

federal and state courts. AFPF believes judicially

created barriers to meaningful Article III review are

inconsistent with the separation of powers. Those

facing ultra vires or unconstitutional agency

enforcement actions should not have to face years of

potentially ruinous costs to have their day in court.

Consistent with AFPF’s particular interest in this

case, AFPF has also appeared as amicus curiae in

Axon Enterprise, Inc. v. Federal Trade Commission,

No. 21-86, which presents the related question

“[w]hether Congress impliedly stripped federal

district courts of jurisdiction over constitutional

challenges to the Federal Trade Commission’s

structure, procedures, and existence by granting the

1 All parties have consented to the filing of this

brief. Amicus

curiae states that no counsel for any party authored this brief in

whole or in part, and no entity or person, aside from amicus

curiae or its counsel, made any monetary contribution intended

to fund the preparation or submission of this brief.

2

courts of appeals jurisdiction to ‘affirm, enforce,

modify, or set aside’ the Commission’s cease-anddesist orders.” Axon Cert. Pet. i. AFPF believes that

the FTC and SEC inhouse administrative

enforcement schemes are both unconstitutional for

many reasons. And neither the FTC Act nor the SEC

Act implicitly strip district court jurisdiction over

constitutional (and at least some ultra vires)

challenges to these administrative agencies’ inhouse

administrative prosecutions.

SUMMARY OF ARGUMENT

It is not the law that an agency can do whatever it

wants for as long as it wants to a business or

individual—no matter how ultra vires, abusive, or

unconstitutional—without being subject to judicial

review unless and until that abusive process ends.

Were that the case, agency enforcement action would

supplant the jurisdiction of Article III courts even in

cases of constitutional questions, presenting a clear

violation of the separation of powers. That proposition

is particularly true with respect to so-called

“independent” agencies, where even the political

branches cannot meaningfully intervene, leaving

agencies wholly unaccountable until any opportunity

for meaningful redress has been extinguished.

Nothing in the SEC Act—or materially

indistinguishable statutory schemes of other agencies

like the FTC—shutters the courthouse doors for those

facing unconstitutional agency enforcement actions.

Nothing in Thunder Basin Coal Co. v. Reich, 510 U.S.

200 (1994), Elgin v. Department of Treasury, 567 U.S.

1 (2012), or any of this Court’s other precedent

purports to bar review of Ms. Cochran’s claims. In

3

fact, this Court’s precedent in Free Enterprise Fund v.

Public Co. Accounting Oversight Board, 561 U.S. 477

(2010), says the exact opposite.

Any handwringing about administrative or

judicial efficiency, or purported administrative

expertise, as justifying this abdication of the judicial

role—particularly as to constitutional questions and

statutory interpretation—must yield in the face of

citizens’ basic right to be free from extralegal

administrative proceedings. Courts must retain

jurisdiction, in the Article III sense, to act as a

necessary safety valve for meritorious ultra vires and

constitutional

claims—particularly

structural

constitutional claims that go to the very legality of the

process, as is the case here.

Here, the district court had federal question

jurisdiction over Ms. Cochran’s constitutional claims.

Nothing in the SEC Act purports to bar district court

review of these claims. Accordingly, the district court

had a duty to exercise jurisdiction and address the

merits of Ms. Cochran’s constitutional objections to

the SEC’s administrative prosecution.

On the merits, the SEC’s administrative process

offends the Constitution in many ways. If the SEC

wants to prosecute Ms. Cochran and seek substantial

civil penalties, it should be required to prove up its

case in federal court, subject to the protections of the

Federal Rules of Civil Procedure and the Federal

Rules of Evidence, not to mention Article III, due

process, and the Seventh Amendment. The

Constitution requires no less.

4

ARGUMENT

I.

THE SEC ACT DOES NOT IMPLIEDLY STRIP

JURISDICTION OVER MS. COCHRAN’S CLAIMS.

A. Courts

Have

Jurisdiction

Over

Constitutional and Ultra Vires Challenges

to SEC Administrative Prosecutions.

Ms. Cochran has brought substantial claims

against the SEC. Section 1331 states that “district

courts shall have original jurisdiction of all civil

actions arising under the Constitution, laws, or

treaties of the United States.” 28 U.S.C. § 1331; see

also id. § 1361 (mandamus). “Not some or most—but

all.” Pet. App. 6a. 5 U.S.C. § 702 waives SEC’s

sovereign immunity for all “agency actions,” see

Trudeau v. FTC, 456 F.3d 178, 187 (D.C. Cir. 2006),

including the filing of administrative charges, see FTC

v. Standard Oil Co. of California, 449 U.S. 232, 238

n.7 (1980). The Declaratory Judgment Act authorizes

declaratory and injunctive relief. 2 28 U.S.C. §§ 2201,

2202; see Bell v. Hood, 327 U.S. 678, 684 (1946) (“[I]t

is established practice for this Court to sustain the

jurisdiction of federal courts to issue injunctions to

protect rights safeguarded by the Constitution[.]”); see

also TransUnion LLC v. Ramirez, 141 S. Ct. 2190,

2210 (2021) (“[A] person exposed to a risk of future

harm may pursue . . . injunctive relief to prevent the

harm from occurring, at least so long as the risk of

harm is sufficiently imminent and substantial.”).

2 In addition, under the All Writs Act, courts “may issue all writs

necessary or appropriate in aid

jurisdictions[.]” 28 U.S.C. § 1651(a).

of

their

respective

5

Thus, the district court had a duty to exercise federalquestion

jurisdiction

over

Ms.

Cochran’s

constitutional claims, and the power to grant Ms.

Cochran the relief she sought, absent a jurisdictionstripping statute.3 There is no such statute. See also

Pet. App. 7a (“The statute says nothing about people .

. . who have not yet received a final order of the

Commission. Nor does it say anything about people . .

. who have claims that have nothing to do with any

final order that the Commission might one day

issue.”).

To be sure, Congress may statutorily limit the

subject-matter jurisdiction of lower federal courts. See

U.S. Const. Art. III, § 2; 5 U.S.C. § 703; see also

Sheldon v. Sill, 49 U.S. (8 How.) 441, 449 (1850). But

“[i]n light of §1331, the question is not whether

Congress has specifically conferred jurisdiction, but

whether it has taken it away.” Elgin, 567 U.S. at 25

(Alito, J., dissenting). If Congress wants to do that, it

must clearly say so. See Cameron v. EMW Women’s

Surgical Center, P.S.C., 142 S. Ct. 1002, 1009 (2022)

(“We do not read a statute or rule to impose a

jurisdictional requirement unless its language clearly

does so.” (citing Henderson v. Shinseki, 562 U.S. 428,

439 (2011)).

As Judge Silberman has explained: “The courts’ power to

impose equitable remedies against agencies is broader than its

power to impose legal remedies against individuals. . . . The

court’s power to enjoin unconstitutional acts by the government

. . . is inherent in the Constitution itself.” Hubbard v. U.S. EPA,

Adm’r, 809 F.2d 1, 11 n.15 (D.C. Cir. 1986) (citing Marbury v.

Madison, 5 U.S. (1 Cranch) 137 (1803)).

3

6

Here, Congress has not clearly stated an intent to

shut the courthouse doors to Ms. Cochran’s

constitutional claims.4 The SEC’s judicial review

provision creates only a limited exception to the

general rule of district-court jurisdiction by providing

jurisdiction in the Courts of Appeals when a petition

for review of a final Commission order is filed in a U.S.

Court of Appeals, “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.” 15 U.S.C. §

78y(a)(3) (emphasis added). “[T]here would be no

point in making jurisdiction ‘exclusive’ in the court of

appeals if no other court ever had jurisdiction.” Pet.

App. 9a. No other straight-to-the-Court-of-Appeals

process is provided to transfer jurisdiction away from

the district court when the case presents itself in

another posture. No exception to ordinary jurisdiction

of the federal courts can be inferred from the narrow

exclusive jurisdiction provision in the SEC Act for

appeals from final orders. Cf. E.I. Du Pont de Nemours

& Co. v. FTC, 488 F. Supp. 747, 750 (D. Del. 1980)

(applying this analysis to analogous FTC Act). See

generally Antonin Scalia & Bryan Garner, Reading

Law 107 (2012).

Rather, the SEC Act quite sensibly places

exclusive jurisdiction in the Courts of Appeals when a

suit involves a challenge to an SEC final order—the

role of the court in such circumstances is more akin to

Even if the question was close, any statutory ambiguities

should be construed against the interests of its drafter: the

government. See also Wash. State Dep’t of Licensing v. Cougar

Den, Inc., 139 S. Ct. 1000, 1016 (2019) (Gorsuch, J., concurring

in judgment). The benefit of any doubt must go to Ms. Cochran.

4

7

that of an appellate court and, given the

administrative proceedings that have already

occurred, going straight to the court of appeals allows

for more prompt completion of judicial review. But

this path for exclusive review of a particular type of

agency order indicates nothing about the availability

of judicial review for other claims involving the

agency. Cf. Sackett v. EPA, 566 U.S. 120, 129 (2012)

(“[I]f the express provision of judicial review in one

section of a long and complicated statute were alone

enough to overcome the APA’s presumption of

reviewability for all final agency action, it would not

be much of a presumption at all.”).

This Court has previously explained how the

judicial review provision at issue here works with

other statutes, not against them: “[T]he text does not

expressly limit the jurisdiction that other statutes

confer on district courts. Nor does it do so implicitly.”

Free Enter. Fund, 561 U.S. at 489 (citing 28 U.S.C. §§

1331, 2201); see also Pet. App. 25a (“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.”). “Here, the text is as

unambiguous as can be. Section 1331 creates

jurisdiction, and § 78y strips only part of it.” Pet. App.

35a (Oldham, J., concurring); see also Tilton v. SEC,

824 F.3d 276, 299 n.6 (2d Cir. 2016) (Droney, J.,

dissenting).

The SEC Act provides for jurisdiction channeling

to the Courts of Appeals of claims challenging an SEC

final order; it otherwise leaves in place district courts’

general federal-question jurisdiction. District courts

have a “virtually unflagging” obligation to decide

8

cases within their jurisdiction. Lexmark Int’l, Inc. v.

Static Control Components, Inc., 572 U.S. 118, 126

(2014); see also 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.”). And as Chief Justice Marshall has

explained, courts “have no more right to decline the

exercise of jurisdiction which is given, than to usurp

that which is not given. . . . Questions may occur which

. . . [courts] would gladly avoid; but . . . [courts] cannot

avoid them.” Cohens v. Virginia, 19 U.S. (6 Wheat.)

264, 404 (1821). That observation resonates here. For

“‘[w]hen a Federal court is properly appealed to in a

case over which it has by law jurisdiction, it is its duty

to take such jurisdiction. . . . The right of a party

plaintiff to choose a Federal court where there is a

choice cannot be properly denied.’” New Orleans Pub.

Serv., Inc. v. Council of New Orleans, 491 U.S. 350,

358–59 (1989) (Scalia, J.) (quoting Willcox v.

Consolidated Gas Co., 212 U.S. 19, 40 (1909)).

If the SEC scheme is unconstitutional, that is for

the courts to decide—let the chips fall where they

may. Cf. Collins v. Yellen, 141 S. Ct. 1761, 1780 (2021)

(“[W]henever a separation-of-powers violation occurs,

any aggrieved party with standing may file a

constitutional challenge.”). But “[t]he SEC should not

be the decider of its own constitutionality.” Linda

Jellum, The SEC’s Fight to Stop District Courts From

Declaring Its Hearings Unconstitutional, 101 Tex. L.

R. (forthcoming 2022).5 And it is no answer to “allow

5 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4041454.

9

the agency to duck and weave its way out of

meaningful judicial review” of that question. See

Fleming v. USDA, 987 F.3d 1093, 1111 (D.C. Cir.

2021) (Rao, J., concurring in part, dissenting in part).

B. Case Law Does Not Bar the Courthouse

Doors to Constitutional Claims.

Nor does case law bar the courthouse doors.

Thunder Basin, 510 U.S. 200, and Elgin, 567 U.S. 1,

were both rooted in implied congressional intent. The

principles they announce cannot be transplanted from

old soil to new without an assessment of the

congressional intent embodied there. And that

assessment of the SEC Act confirms Congress did not

intend to preclude Ms. Cochran from raising her

claims in federal district court. Nothing in Thunder

Basin or Elgin compels otherwise. See also Pet. App.

78a (Oldham, J., concurring) (“Elgin did not purport

to transform the Thunder Basin test from a claimfocused inquiry to a case-focused inquiry.”).

The SEC Act’s history and structure is

significantly different from that of the statutes at

issue in Thunder Basin and Elgin. In Thunder Basin,

for example, the Mine Act’s history shows Congress

specifically intended to narrow the scope of district

court review. See 510 U.S. at 209–11 & n.15 (noting

Congress amended the Act to eliminate district court

review and finding “the legislative history and these

amendments to be persuasive evidence that Congress

intended to” preclude judicial review). Similarly,

Congress intentionally narrowed the scope of district

court jurisdiction when it enacted the Civil Service

Reform Act (“CSRA”), the statute at issue in Elgin.

See 567 U.S. at 11–12. The SEC Act’s history includes

10

no similar history. The Mine Act also allowed

aggrieved mine operators, not the Secretary, to

initiate actions before the Commission. Thunder

Basin, 510 U.S. at 209. And the CSRA set forth in

“painstaking detail . . . the method for covered

employees to obtain review of adverse employment

actions[.]” Elgin, 567 U.S. at 11–12.

By contrast, businesses and individuals like Ms.

Cochran have no ability to obtain review of their

constitutional challenges to the SEC’s authority

through the SEC Act scheme unless and until the SEC

issues a final order against them. Moreover, the Mine

Act involved administrative proceedings before an

independent commission (rather than the agency

enforcing the Mine Act), see Thunder Basin, 510 U.S.

at 204; Sec’y of Labor v. Knight Hawk Coal, LLC, 991

F.3d 1297, 1300 (D.C. Cir. 2021), and the CSRA

involved actions by the government as an employer,

rather than a regulator, see United States v. Fausto,

484 U.S. 439, 443–47 (1988); Nyunt v. Chairman,

Broad. Bd. of Governors, 589 F.3d 445, 448 (D.C. Cir.

2009) (Kavanaugh, J.) (“The CSRA is also exclusive:

It constitutes the remedial regime for federal

employment and personnel complaints.”). Those are

different animals from inhouse enforcement

proceedings brought by administrative agencies,

particularly when, as here, those enforcement

proceedings are interfering with private rights.

Thunder Basin itself confirms that the district

court had jurisdiction. There, the Court emphasized

that preclusion does not apply to claims that are

“wholly collateral to a statute’s review provisions and

outside the agency’s expertise, particularly where a

finding of preclusion could foreclose all meaningful

11

judicial review.” Thunder Basin, 510 U.S. at 213

(cleaned up). Nor does it preclude all constitutional

claims. See id. at 216–18; Ironridge Global IV, Ltd. V.

SEC, 146 F. Supp. 3d 1294, 1303 n.5 (N.D. Ga. 2015)

(“[S]ince Thunder Basin, other courts have held that

the Mine Act does not preclude all constitutional

claims from district court jurisdiction.”) (citation

omitted)); see also Luis Inaraja Vera, Delayed Judicial

Review of Agency Action, 56 Harv. J. on Legis. 199, 228

(2019) (Thunder Basin “was not a facial challenge to

the constitutional validity of the enforcement and

judicial review provisions of the Mine Safety Act.”

(citing Thunder Basin, 510 U.S. at 218 n.22)). Here,

Ms. Cochran’s constitutional claims are collateral to

the enforcement proceeding, rely on superior law, and

the SEC lacks expertise or authority to address these

claims. Cf. Free Enter. Fund, 561 U.S. at 491 & n.2

(noting “Petitioners’ constitutional claims are . . .

outside the Commission’s competence and expertise”).

Likewise, Standard Oil, 449 U.S. 232, if anything,

shows that the district court should have reached the

merits of Ms. Cochran’s claims, confirming that

issuance of an administrative complaint is an “agency

action” that waives sovereign immunity.6 See id. at

238 n.7. But that is all. Standard Oil did not address

the issue of jurisdiction, instead solely addressing the

The district court mistakenly overread Standard Oil to

foreclose the possibility of injunctive relief. See Pet. App. 143a–

144a (“Were it not for the problem created by the ruling of the

Supreme Court in [Standard Oil v.] Federal Trade Commission,

the court would give serious consideration to grant of plaintiff’s

request for a preliminary injunction. As it is, the court considers

that it is not authorized to do so.”).

6

12

APA’s general requirement of “final agency action” to

state a claim on which relief may be granted under the

APA. See id. at 244; see Pet. App. 26a (“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[.]” (citations omitted));

see also Athlone Indus., Inc. v. Consumer Prod. Safety

Com., 707 F.2d 1485, 1489 n.30 (D.C. Cir. 1983)

(distinguishing Standard Oil).

That hurdle does not apply in cases claiming

constitutional violations or ultra vires agency action.

To the extent that dicta in Standard Oil can be used

to support the proposition that no irreparable harm

flows from the disruption and litigation expense

caused by protracted administrative enforcement

proceedings, see 449 U.S. at 244, and thus the federal

judiciary is powerless under all circumstances to

review

administrative

agency

enforcement

proceedings (it does not), that decision should be

narrowed or abandoned.

C. District Courts Have Jurisdiction Over At

Least Some Ultra Vires Claims.

While not directly at issue here, this Court should

also make clear nothing in the SEC Act purports to

strip jurisdiction over ultra vires claims, particularly

in extreme cases of SEC overreach causing severe

13

hardship,7 consistent with pre-Thunder Basin circuit

precedent. See, e.g., Touche Ross & Co. v. SEC, 609

F.2d 570, 575–76 (2d Cir. 1979) (citing Sterling Drug,

Inc. v. Weinberger, 509 F.2d 1236, 1239 (2d Cir. 1975)

(Friendly, J.)). Cf. American Gen. Ins. Co. v. FTC, 496

F.2d 197, 200 (5th Cir. 1974) (possible jurisdiction

over “gross and egregious” errors). After all, “[t]he acts

of all [government] . . . officers must be justified by

some law, and in case an official violates the law to

the injury of an individual the courts generally have

jurisdiction to grant relief.” Am. Sch. Of Magnetic

Healing v. McAnnulty, 187 U.S. 94, 108 (1902); see,

e.g., Leedom v. Kyne, 358 U.S. 184 (1958); Stark v.

Wickard, 321 U.S. 288 (1944). See generally Chamber

of Commerce of the United States v. Reich, 74 F.3d

1322, 1327–29 (D.C. Cir. 1996).

As Judge Silberman has observed: “If a plaintiff is

unable to bring his case predicated on either a specific

or a general statutory review provision, he may still

be able to institute a non-statutory review action.”8

Chamber of Commerce, 74 F.3d at 1327 (citing Byse

7 Nor does Standard Oil bar review of all ultra vires claims. Cf.

Pepsico, Inc. v. FTC, 472 F.2d 179, 187 (2d Cir. 1972) (Friendly,

J.) (tentatively accepting principle that “one can find ‘final

agency action for which there is no other adequate remedy in a

court’ if an agency refuses to dismiss a proceeding that is plainly

beyond its jurisdiction as a matter of law or is being conducted

in a manner that cannot result in a valid order”).

8 Subject-matter jurisdiction to adjudicate these types of ultra

vires claims seeking negative injunctions does not hinge on the

presence or absence of “final agency action,” as these are not APA

claims. See also Air Courier Conference v. Am. Postal Workers

Union, 498 U.S. 517, 523 n.3 (1991) (“The judicial review

provisions of the APA are not jurisdictional[.]”).

14

and Fiocca, Section 1361 of the Mandamus and Venue

Act of 1962 and “Nonstatutory” Judicial Review of

Federal Administrative Action, 81 Harv. L. Rev. 308,

321 (1967)); see 28 U.S.C. § 1361. These types of

claims would fall outside the SEC Act’s review

scheme, as SEC would not have any lawful authority

even to bring the inhouse enforcement action. 9

D. The SEC Act and the FTC Act Should Be

Interpreted In Para Materia: Neither

Impliedly Shutters the Courthouse Doors.

“As the federal government has previously

explained, the SEC statutory review scheme is

materially identical to the FTC statutory review

scheme.” Cert. Pet. 6 (citing BIO 14, Axon Enterprise,

(No. 21-86)); see also Axon Enter. v. FTC, 986 F.3d

1173, 1180 (9th Cir. 2021) (noting FTC Act’s review

scheme “is almost identical to the statutory review

provision in the SEC Act”), cert. granted in part, 142

S. Ct. 895 (2022). Amicus agrees insofar as neither

statute implicitly strips district court jurisdiction to

adjudicate constitutional (and at least some ultra

vires) challenges to ongoing

administrative

prosecutions, which, as discussed below, are

unconstitutional for a host of reasons. See infra

Section IV. That proposition also holds true with

respect to materially identical statutory schemes

Usurper in unlawful office claims would also appear to fall

outside the SEC Act and similar review schemes. See generally

Calcutt v. Fed. Deposit Ins. Corp., No. 20-4303, 2022 U.S. App.

LEXIS 15979, at *111–14 (6th Cir. June 10, 2022) (Murphy, J.,

dissenting).

9

15

allowing other “independent” administrative bodies to

bring inhouse prosecutions on their home turf.

II.

SEC’S RIGGED ADMINISTRATIVE PROCESS

IRREPARABLY HARMS MS. COCHRAN.

Absent judicial review now, Ms. Cochran will

suffer multiple irreparable harms. Forcing Ms.

Cochran through a protracted and expensive

unconstitutional administrative process “before [she]

may assert [her] constitutional claim in a federal court

means that by the time the day for judicial review

comes, [she] will already have suffered the injury that

[she is] attempting to prevent.” Tilton, 824 F.3d at 298

(Droney, J., dissenting); see also Seila Law LLC v.

Consumer Fin. Prot. Bureau, 140 S. Ct. 2183, 2196

(2020) (“[W]hen . . . a [removal restriction] provision

violates the separation of powers it inflicts a ‘hereand-now’ injury on affected third parties that can be

remedied by a court.” (citation omitted)); Bond v.

United States, 564 U.S. 211, 222 (2011). Cf. Doe Co. v.

Cordray, 849 F.3d 1129, 1136 (D.C. Cir. 2017)

(Kavanaugh, J., dissenting) (“Irreparable harm occurs

almost by definition when a person or entity

demonstrates a likelihood that it is being regulated on

an ongoing basis by an unconstitutionally structured

agency[.]”). That constitutes irreparable harm.

That is not the only irreparable harm at issue—

even accepting the dubious proposition that the

“expense and disruption of . . . protracted adjudicatory

proceedings” is merely “part of the social burden of

16

living under government[.]”10 See Standard Oil, 449

U.S. at 244. Time and again, courts have also held

unrecoupable costs, reputational harm, adverse

publicity, and loss of good will can constitute

irreparable harm. See, e.g., Odebrecht Constr. v. Sec’y,

Fla. DOT, 715 F.3d 1268, 1289 (11th Cir. 2013)

(“inability to recover monetary damages because of

sovereign immunity” is irreparable harm); Ferrero v.

Associated Materials, Inc., 923 F.2d 1441, 1449 (11th

Cir. 1991) (“loss of customers and goodwill”);

Housworth v. Glisson, 485 F. Supp. 29, 35 (N.D. Ga.

1978) (“injury . . . caused by the publicity attending

the license revocations”).11 Individual respondents in

SEC administrative prosecutions are also essentially

unemployable in their chosen profession for the

duration. See Cert. Amicus Br. of Raymond Lucia et

al. 2, 12 (describing years-long irreparable harms

caused by SEC inhouse enforcement proceedings). Cf.

Enyart v. Nat’l Conference of Bar Exam’rs, Inc., 630

F.3d 1153, 1166 (9th Cir. 2011) (plaintiff’s “likely loss

10 The district court was “deeply concerned with the fact that . . .

[Ms. Cochran] already has been subjected to extensive

proceedings before an ALJ who was not constitutionally

appointed, and contends that the one she must now face for

further, undoubtedly extended, proceedings likewise is

unconstitutionally appointed.” Pet. App. 143a. As the district

court explained: “She should not have been put to the stress of

the first proceedings, and, if she is correct in her contentions, she

again will be put to further proceedings, undoubtedly at

considerable

expense

and

stress,

before

another

unconstitutionally appointed administrative law judge.” Pet.

App. 143a.

11 Any of these irreparable harms is sufficient to support an

injunction.

17

of the ability to pursue her chosen profession”

constitutes irreparable harm).

Further still, this Court’s precedent indicates

retrospective relief may be ill-suited for remedying

removal defects. See Collins, 141 S. Ct. at 1787–89;

Pet. App. 75a (Oldham, J., concurring) (suggesting

that, under Collins, “it will be very challenging to

obtain

meaningful

retrospective

relief

for

constitutional removability claims” and, as a result,

“challengers with meritorious removability claims

may often be left without any remedy if they are forced

to wait until after enforcement proceedings

conclude”).12

This should not be allowed to continue. This Court

should not “require plaintiffs to bet the farm” as a

condition precedent to obtaining judicial review. See

Free Enter. Fund, 561 U.S. at 490–91. But that is

exactly what is at stake. See Tilton, 824 F.3d at 298

n.5 (Droney, J., dissenting) (“[I]t might well be that

choosing to litigate is, in fact, equivalent to ‘betting

the farm.’”); Pet. App. 69a (Oldham, J., concurring)

(“Throughout the entire administrative process . . . the

target must choose whether to settle or bet the

farm.”).13 And the high (constitutionally dubious)

12 Unlike here, where Ms. Cochran seeks prospective injunctive

relief, in Collins, “the only remaining remedial question

concern[ed] retrospective relief.” 141 S. Ct. at 1787; id. at 1795

(Gorsuch, J., concurring in part).

13 Cf. Axon, 986 F.3d at 1193 (Bumatay, J., concurring in

judgment in part, dissenting in part) (“Without a guaranteed

18

price respondents—particularly small businesses and

individuals—must pay to access judicial review

through the SEC Act scheme underscores the

importance of district court jurisdiction. See Cert. Br.

of Raymond Lucia et al. 12–13.

The SEC Act and similar statutory review schemes

should not be interpreted to “enable the strongarming of regulated parties into ‘voluntary

compliance’ without the opportunity for judicial

review—even judicial review of the question whether

the regulated party is within the . . . [agency’s]

jurisdiction.” Sackett, 566 U.S. at 130–31. Cf. Gideon

Mark, SEC and CFTC Administrative Proceedings, 19

U. Pa. J. Const. L. 45, 57 (2016) (“during the period

2002–2014 the SEC’s settlement rate remained

constant at about 98%”). “[A]t least at some point,

even the temporary subjection of a party to a

Potemkin jurisdiction so mocks the party’s rights as

to render end-of-the-line correction inadequate.”

United States v. Microsoft Corp., 147 F.3d 935, 954

(D.C. Cir. 1998). So too here.

III.

THE SEC’S INHOUSE PROCESS DEPRIVES

RESPONDENTS OF ANY OPPORTUNITY FOR

FAIR AND LEVEL REVIEW.

The SEC inhouse prosecution scheme is indeed a

Potemkin jurisdiction. Like the unconstitutional FTC

administrative process at issue in Axon, the SEC’s

vehicle for court review, Axon’s only recourse is to intentionally

lose before the FTC to receive any assurance of Article III

adjudication of its clearance process claim. . . . I see no reason

why Axon must ‘bet the farm’ to get its day in court.”).

19

inhouse process—in which it acts as investigator,

prosecutor, and judge of its own cause 14—is rigged

against respondents. See David Zaring, Enforcement

Discretion at the SEC, 94 Tex. L. Rev. 1155, 1165

(2016) (“In ALJ proceedings, the SEC’s Enforcement

Division brings the case against the defendant, the

judge is an employee of the SEC, and appeals from the

proceeding go to SEC commissioners, making the SEC

plaintiff, judge, and reviewer.”); Chris Cox, The

Growing Use of SEC Administrative Proceedings, 7

(May 13, 2015), tinyurl.com/yyusqwh2.

Worse, since 2010, the SEC has been able to obtain

civil penalties through its inhouse administrative

process. “The Dodd-Frank Act dramatically expanded

the

SEC’s

authority

to

impose

penalties

administratively, making it essentially ‘coextensive

with [the SEC’s] authority to seek penalties in Federal

court.’” Tilton, 824 F.3d at 279 (alteration in original;

citation omitted). This means “that the S.E.C. can

today obtain through internal administrative

proceedings nearly everything it might obtain by

going to court.” Jed S. Rakoff, U.S. Dist. Judge for the

S. Dist. of N.Y., PLI Securities Regulation Institute

Keynote Address: Is the S.E.C. Becoming a Law Unto

Making matters worse, the SEC itself recently revealed “a

control deficiency related to the separation of its enforcement

and adjudicatory functions within its system for administrative

adjudications.” Commission Statement at 1 (appended to Letter

of April 8, 2022, from the Solicitor General). Specifically, “certain

Adjudication memoranda were, for a period of time, accessible to

all Enforcement staff, including attorneys investigating and

prosecuting the enforcement matters discussed in those

Adjudication memoranda.” Commission Statement at 2.

14

20

Itself?,

5

(Nov.

5,

2014),

https://securitiesdiary.files.wordpress.com/2014/11/ra

koff-pli-speech.pdf. Thus, the SEC “now has an

essentially unfettered choice between taking its civil

complaint to an Article III or agency judge.” Zaring,

94 Tex. L. Rev. at 1164; see 15 U.S.C. § 78u-2(a).

For obvious reasons, the SEC frequently prefers to

litigate on its home turf, where it enjoys substantial

homefield advantages. For starters, the SEC itself

makes the rules of the game, stacking the deck

against respondents like Ms. Cochran. “SEC

administrative proceedings are governed by the SEC’s

Rules of Practice (‘SEC RoP’) . . . . Neither the Federal

Rules of Civil Procedure (‘FRCP’) nor the Federal

Rules of Evidence (‘FRE’) apply.” Mark, 19 U. Pa. J.

Const. L. at 65–66. “There is no provision in the SEC’s

RoP for making a motion to dismiss, asserting a

counterclaim, or moving for summary judgment.” Id.

“There is no right to a jury trial.” Id. at 67. “There is

very limited discovery . . . . In general, neither

interrogatories nor discovery depositions are allowed.

This is true even in complex cases where the Division

may have conducted dozens of on-the-record

examinations of fact witnesses before the OIP was

filed.” Id. at 67–68. “[T]he discovery problem is

compounded because the SEC often makes broad

assertions of both the work product doctrine and the

deliberative process privilege, and those assertions

are typically upheld.” Id. at 78. “Hearsay is admissible

and can provide the basis for a finding that a

securities violation has occurred.” Id. at 68–69. But cf.

SEC v. Healthsouth Corp., 261 F. Supp. 2d 1298, 1328

(N.D. Ala. 2003) (explaining “[h]earsay testimony is

21

presumptively unreliable under the common law” and

rejecting SEC’s hearsay in federal court action).

Unsurprisingly, the SEC “win[s] the vast majority

of these in-house prosecutions[.]” Adam M. Katz,

Eventual Judicial Review, 118 Colum. L. Rev. 1139,

1153–54 (2018). In contested cases, SEC ALJs

overwhelmingly rule against respondents.15 See

Gideon Mark, Response: SEC Enforcement Discretion,

94 Tex. L. Rev. Online 261, 262 (2016) (“During the

period from October 2010 to March 2015, the SEC

prevailed against 90% of respondents in contested

cases heard by ALJs, and in the same period the SEC

had a considerably lower success rate of 69% in

federal court.”); Drew Thornley & Justin Blount, SEC

In-House Tribunals: A Call for Reform, 62 Vill. L. Rev.

261, 286 (2017) (citing Jean Eaglesham, SEC Wins

with In-House Judges, Wall Street Journal (May 6,

2015), https://www.wsj.com/articles/sec-wins-with-inhouse-judges-1430965803). Respondents can then

appeal the ALJ’s initial decision to the Commission—

the very same body that voted to authorize the

enforcement action. See 17 C.F.R. § 201.410. But

“[t]he appellate statistics from direct appeals before

the SEC, meaning appeals from an ALJ’s decision to

the Commission itself, are equally dire for defendants.

In some situations, exercising this right of appeal

resulted in a worse outcome for defendants when the

15 Former and current SEC ALJs have acknowledged that the

SEC’s inhouse process is “slanted” against respondents. See

Office of Inspector General, Report of Investigation, Case No. 15ALJ-0482-1,

at

19–20

(2016),

https://www.sec.gov/oig/reportspubs/Final-Report-ofInvestigation.pdf.

22

Commission increased the initial penalty.”16 Thornley

& Blount, 62 Vill. L. Rev. at 286; see also Eaglesham,

supra (Commission adopted ALJ factual findings 95

percent of time).

Only after this process concludes will a respondent

have access to judicial review in a federal court of

appeals. 15 U.S.C. § 78y(a)(1). But even that judicial

review is hardly meaningful given the highly

deferential standard of review. See 15 U.S.C. §

78y(a)(4) (“The findings of the Commission as to the

facts identified by the Commission . . . if supported by

substantial evidence, are conclusive.”); see also

Lorenzo v. SEC, 872 F.3d 578, 583 (D.C. Cir. 2017)

(“we have repeatedly described the [substantial

evidence] standard as a ‘very deferential’ one”

(citation omitted)). Cf. id. at 597 (Kavanaugh, J.,

dissenting) (this standard “as applied here, seems

akin to a standard of ‘hold your nose to avoid the

stink’”).

Judicial deference to the Commission’s factual

findings deprive even the few respondents who

survive the SEC’s administrative process of any

opportunity for independent Article III review on a

level playing field, further stacking the deck against

respondents. See also Lorenzo, 872 F.3d at 599–602

16 Commission review of initial ALJ decisions is “discretionary.”

15 U.S.C. § 78d-1(b). “[T]he SEC can decide against reviewing an

ALJ decision at all. And when the SEC declines review (and

issues an order saying so), the ALJ’s decision itself ‘becomes final’

and is ‘deemed the action of the Commission.’” Lucia v. SEC, 138

S. Ct. 2044, 2054 (2018) (citing 17 C.F.R. § 201.360(d)(2); 15

U.S.C. § 78d-1(c)).

23

(Kavanaugh, J., dissenting). Cf. Gary Lawson, The

Rise and Rise of the Administrative State, 107 Harv.

L. Rev. 1231, 1247 (1994) (“This kind of deferential

review arguably fails to satisfy Article III.”). Indeed,

the substantial evidence standard essentially

reverses the burden of proof on petitions for review,

given that substantial evidence is a lower standard of

proof than the preponderance standard.17 See also

Meadows v. SEC, 119 F.3d 1219, 1224 (5th Cir. 1997)

(“‘Substantial evidence . . . is more than a mere

scintilla and less than a preponderance.’” (citation

omitted)); Gebhart v. SEC, 595 F.3d 1034, 1043 (9th

Cir. 2010) (“[A] reviewing court must uphold the

agency’s [factual] findings ‘unless the evidence

presented would compel a reasonable finder of fact to

reach a contrary result.’” (citation omitted)).

In short, SEC administrative prosecutions are

severely slanted against respondents from start to

finish. See generally Lorenzo, 872 F.3d at 596–602

(Kavanaugh, J., dissenting) (describing unfair

process).

IV.

SEC’S

UNCONSTITUTIONAL

STRUCTURE

THREATENS INDIVIDUAL LIBERTY.

On the merits, SEC’s existence offends the

Constitution in many ways. To begin, the—at

minimum—two-tier ALJ removal restrictions plainly

In some instances, respondents in SEC administrative

prosecutions must affirmatively prove their innocence to avoid

liability. See Comments of Andrew N. Vollmer on Office of Mgmt.

& Budget RFI, OMB-2019-0006, at 5 (Mar. 9, 2020),

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3551634.

17

24

violate the Constitution. The SEC ALJs cannot

exercise the judicial power. See also U.S. Const. Art.

III, § 1; Martin v. Hunter’s Lessee, 14 U.S. (1 Wheat.)

304, 330–31 (1816) (“Congress cannot vest any portion

of the judicial power of the United States, except in

courts ordained and established by itself[.]”). Instead,

no matter how one chooses to describe the work ALJs

are tasked with doing, “under our constitutional

structure they must be exercises of—the ‘executive

Power.’” City of Arlington v. FCC, 569 U.S. 290, 304

n.4 (2013) (citing U.S. Const. Art. II, §1, cl. 1); see also

Free Enterprise Fund, 561 U.S. at 514; id. at 516

(Breyer, J., dissenting). But cf. Calcutt, 2022 U.S. App.

LEXIS 15979, at *123 (Murphy, J., dissenting) (“The

parties assume that the FDIC performs only executive

functions. Our resolution should not be taken to have

impliedly adopted that premise. The FDIC did not just

prosecute this action. It also adjudicated the action[.]”

(emphasis in original)).

This Court has held “Congress cannot limit the

President’s authority” through granting “two levels of

protection from removal for those who nonetheless

exercise significant executive power.” Free Enter.

Fund, 561 U.S. at 514. Straightforward application of

Lucia v. SEC, 138 S. Ct. 2044 (2018), requires the

conclusion that SEC ALJs are Officers of the United

States, who exercise significant executive power, see

id. at 2055. “Specifically, SEC ALJs exercise

considerable power over administrative case records

by controlling the presentation and admission of

evidence; they may punish contemptuous conduct;

and often their decisions are final and binding.”

Jarkesy v. SEC, 34 F.4th 446, 464 (5th Cir. 2022)

(citing Lucia, 138 S. Ct. at 2053–54). SEC ALJs enjoy

25

at least two tiers of removal protections. 5 U.S.C. §

7521(a), (b)(1) (permitting an ALJ to be removed only

“for cause”); 5 U.S.C. § 1202(d) (permitting MSPB

Board members to be removed “only for inefficiency,

neglect of duty, or malfeasance in office”); Jarkesy, 34

F.4th at 464 (noting “the SEC Commissioners may

only be removed by the President for good cause”).

This arrangement violates Article II. Free Enter.

Fund, 561 U.S. at 514; see also Jarkesy, 34 F.4th at

464 (“hold[ing] that the removal restrictions are

unconstitutional”).

That is a problem because “[i]n the case of a

removal defect, a wholly unaccountable government

agent asserts the power to make decisions affecting

individual lives, liberty, and property.” Collins, 141 S.

Ct. at 1797 (Gorsuch, J., concurring in part). Indeed,

“[i]f anything, removal restrictions may be a greater

constitutional evil than appointment defects. . . . It is

the power to supervise—and, if need be, remove—

subordinate officials that allows a new President to

shape his administration and respond to the electoral

will that propelled him to office.” Id. at 1796 (Gorsuch,

J., concurring in part). After all, “[f]ew things could be

more perilous to liberty than some ‘fourth branch’ that

does not answer even to the one executive official who

is accountable to the body politic.” Id. at 1797

(Gorsuch, J., concurring in part) (citing FTC v.

Ruberoid Co., 343 U.S. 470, 487 (1952) (Jackson, J.,

dissenting)); see also City of Arlington, 569 U.S. at

313–14 (Roberts, C.J., dissenting).

That is not the only constitutional problem with

SEC’s administrative enforcement scheme. Among

other infirmities, SEC’s combination of investigative,

prosecutorial, and adjudicative functions violates due

26

process. Under our Constitution, SEC is not allowed

to act as investigator, prosecutor, and judge of its own

cause.18 See Williams v. Pennsylvania, 136 S. Ct.

1899, 1905 (2016) (“[A]n unconstitutional potential for

bias exists when the same person serves as both

accuser and adjudicator in a case.”). See generally

Andrew N. Vollmer, Accusers as Adjudicators in

Agency Enforcement Proceedings, 52 U. Mich. J.L.

Reform 103 (2018).

More broadly, as Professors Chapman and

McConnell have explained:

The basic idea of due process, both at the

Founding and at the time of adoption of

the Fourteenth Amendment, was that

the law of the land required each branch

of government to operate in a distinctive

manner, at least when the effect was to

deprive a person of liberty or property. .

. . The judiciary was required to

adjudicate cases in accordance with

longstanding procedures, unless the

legislature

substituted

alternative

procedures of equivalent fairness.

Because SEC administrative prosecutions implicate core

private rights, the statutory review provision mandating judicial

deference to the SEC’s factual findings, 15 U.S.C. § 78y(a)(4),

may well be unconstitutional. See generally Evan D. Bernick, Is

Judicial Deference to Agency Fact-Finding Unlawful?, 16 Geo.

J.L. & Pub. Pol’y 27, 42–58 (2018); John Gibbons, Comment, Why

Judicial Deference to Administrative Fact-Finding is

Unconstitutional, 2016 B.Y.U.L. Rev. 1485, 1502–1521 (2016).

18

27

Chapman & McConnell, Due Process as Separation of

Powers, 121 Yale L.J. 1672, 1781–82 (2012).

“Fundamentally, . . . [due process] was about securing

the rule of law. It ensured that the executive would

not be able unilaterally to deprive persons within the

nation of their rights of life, liberty, or property except

as provided by common law or statute and as

adjudicated by independent judicial bodies[.]” Id. at

1808. The SEC inhouse enforcement scheme fails this

test.

The Constitution also bars administrative bodies

from adjudicating private rights inhouse; that task is

reserved for Article III courts. Cf. B&B Hardware,

Inc. v. Hargis Indus., 575 U.S. 138, 171 (2015)

(Thomas, J., dissenting) (“Under our Constitution, the

‘judicial power’ belongs to Article III courts and

cannot be shared with the Legislature or the

Executive.” (citation omitted)). See generally Wellness

Int’l Network, Ltd. V. Sharif, 575 U.S. 665, 714–15

(2015) (Thomas, J., dissenting) (“Nineteenth-century

American jurisprudence confirms that an exercise of

the judicial power was thought to be necessary for the

disposition of private, but not public, rights.”); Oil

States Energy Servs., LLC v. Greene’s Energy Grp.,

LLC, 138 S. Ct. 1365, 1381 (2018) (Gorsuch, J.,

dissenting) (“Article III[] explains that the federal

‘judicial Power’ is vested in independent judges. As

originally understood, the judicial power extended to

‘suit[s] at the common law, or in equity, or admiralty.’”

(quoting Murray’s Lessee v. Hoboken Land &

Improvement Co., 59 U.S. 272 (1856)). Here, the SEC’s

inhouse administrative prosecution implicates core

private rights. Specifically, the SEC is seeking

28

substantial civil penalties against Ms. Cochran. See

Pet. App. 2a.

This “Court has held that actions seeking civil

penalties are akin to special types of actions in debt

from early in our nation’s history which were

distinctly legal claims.” Jarkesy, 34 F.4th at 454

(citing Tull v. United States, 481 U.S. 412, 417–19

(1987)). And “[a] civil penalty was a type of remedy at

common law that could only be enforced in courts of

law.” Tull, 481 U.S. at 422. Accordingly, the SEC’s

enforcement action against Ms. Cochran simply “is

not the sort that may be properly assigned to agency

adjudication under the public-rights doctrine.”

Jarkesy, 34 F.4th at 455. Cf. Calcutt, 2022 U.S. App.

LEXIS 15979, at *123–26 (Murphy, J., dissenting)

(suggesting possibility that the FDIC inhouse

enforcement process violates Article III and due

process). Instead, it belongs in an Article III court.

The SEC’s administrative enforcement scheme

suffers from yet another, related constitutional defect:

it denies Ms. Cochran her Seventh Amendment right

to be tried by a jury of her peers.19 See U.S. Const.

amend. VII. To be sure, “[t]his Court’s precedents

establish that, when Congress properly assigns a

matter to adjudication in a non-Article III tribunal,

‘the Seventh Amendment poses no independent bar to

19 See generally Feltner v. Columbia Pictures Tv, 523 U.S. 340,

348 (1998) (“Seventh Amendment . . . applies not only to

common-law causes of action, but also to ‘actions brought to

enforce statutory rights that are analogous to common-law

causes of action ordinarily decided in English law courts in the

late 18th century[.]’” (citation omitted)).

29

the adjudication of that action by a nonjury

factfinder.’” Oil States Energy Servs., 138 S. Ct. at

1379 (quoting Granfinanciera, S. A. v. Nordberg, 492

U.S. 33, 53–54 (1989)). But Congress has not done so

here. And because the agency is seeking civil

penalties, the Seventh Amendment jury-trial right

applies. See Jarkesy, 34 F.4th at 454–55.

This should not be allowed to stand. If SEC wants

to prosecute Ms. Cochran, due process, Article III, and

the Seventh Amendment all require SEC to do so in

federal court before an independent judge subject to

Ms. Cochran’s right to be tried by a jury of her

peers).20 See Lorenzo, 872 F.3d at 602 (Kavanaugh, J.,

dissenting)

(“Administrative

adjudication

of

individual disputes is usually accompanied by

deferential review. . . . That agency-centric process is

in some tension with Article III of the Constitution,

the Due Process Clause of the Fifth Amendment, and

the Seventh Amendment.”); see also United States v.

Arthrex, Inc., 141 S. Ct. 1970, 1993 (2021) (Gorsuch,

J., concurring in part, dissenting in part) (“Any

suggestion that the neutrality and independence the

framers guaranteed for courts could be replicated

within the Executive Branch was never more than

wishful thinking.”).

The SEC’s enforcement scheme also appears to

unconstitutionally delegate legislative power to the SEC. See

Jarkesy, 34 F.4th at 459–63.

20

30

V.

COMMON OBJECTIONS TO OPENING THE

COURTHOUSE DOORS AND ENFORCING THE

CONSTITUTION LACK MERIT.

The sky will not fall if this Court opens the

courthouse doors and enforces the Constitution’s

demands. And this Court should not be swayed by any

handwaving parade-of-horribles arguments to the

contrary.

First, with respect to the immediate questions

presented by this case and Axon, allowing litigants

enmeshed in administrative prosecutions to raise

constitutional and ultra vires challenges in federal

district court will not cause floodgates problems. Cf.

Pet. App. 109a–110a (Costa, J., dissenting) (arguing

efficiency and “systemic concerns about piecemeal

review in the mine run of cases” counsels against

district court jurisdiction); SEC CA5 En Banc Br. 30–

32. As Judge Jed Rakoff explained in finding

jurisdiction over an equal-protection challenge to an

SEC administrative enforcement action, frivolous

claims can be screened out at the motion to dismiss

stage. See Gupta v. SEC, 796 F. Supp. 2d 503, 514

(S.D.N.Y. 2011). And respondent-plaintiffs cannot

derail ongoing administrative proceedings by

obtaining an injunction unless they can show they are

“likely to succeed on the merits” and “likely to suffer

irreparable harm in the absence of preliminary relief,”

among other things. See Winter v. NRDC, Inc., 555

U.S. 7, 20 (2008). In any event, “when Congress vests

a district court with jurisdiction, it’s obliged to

exercise it—efficiencies aside.” Pet. App. 79a

(Oldham, J., concurring).

31

Second, with respect to the broader constitutional

problems with inhouse enforcement processes,

particularly those implicating core private rights,

enforcing the Constitution’s demands also will not

cause practical or floodgates problems. The SEC and

FTC already have authority to bring enforcement

actions directly in federal court and have done so for

years. See Jarkesy, 34 F.4th at 455–56; see also AMG

Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1347

(2021). And these executive agencies can continue to

enforce the law—in federal court.

Conversely, matters involving garden variety

public rights, such as claims involving government

benefits and federal employment disputes, need not be

addressed by Article III courts in the first instance.21

After all, as Professor Mila Sohoni has explained, “a

government denial of Social Security benefits or a

termination of a government employee for cause

would not” implicate private rights. Mila Sohoni,

Agency Adjudication and Judicial Nondelegation: An

Article III Canon, 107 Nw. U.L. Rev. 1569, 1586

(2013); see also Austin v. Shalala, 994 F.2d 1170, 1177

(5th Cir. 1993) (noting “public right for the

government to recover the overpayment of social

security benefits” properly assigned to agency).

Accordingly, these matters may be initially assigned

to administrative forums. And the overwhelming

majority of ALJs are tasked with this sort of work. To

Cf. Free Enter. Fund, 561 U.S. at 542–43 (Breyer, J.,

dissenting) (“[T]he Federal Government relies on 1,584 ALJs to

adjudicate administrative matters in over 25 agencies. These

ALJs adjudicate Social Security benefits, employment disputes,

and other matters highly important to individuals.”).

21

32

put this in perspective, as of 2017, there were 1,655

Social Security Administration ALJs and 101

Department of Health and Human Services/Office of

Medicare Hearings and Appeals ALJs. See generally

OPM, ALJs By Agency (as of March 2017),

https://www.opm.gov/services-foragencies/administrative-law-judges/#url=ALJs-byAgency. By contrast, SEC employees 5 ALJs, and FTC

employs 1 of the 1,931 ALJs employed by the federal

government. See id.

CONCLUSION

This Court should affirm the judgment of the court

of appeals.

Respectfully submitted,

Michael Pepson

Counsel of Record

Cynthia Fleming Crawford

AMERICANS FOR PROSPERITY FOUNDATION

1310 N. Courthouse Road, Ste. 700

Arlington, VA 22201

(571) 329-4529

mpepson@afphq.org

Counsel for Amicus Curiae

July 7, 2022