Amicus Curiae Brief — Timothy Barton, Petitioner v. Securities and Exchange Commission

No. 25-465

In the

Supreme Court of the United States

_____________

TIMOTHY BARTON,

Petitioner,

v.

UNITED STATES SECURITIES

AND EXCHANGE COMMISSION,

Respondent.

_____________

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

_____________

AMICUS CURIAE BRIEF OF THE

NEW CIVIL LIBERTIES ALLIANCE

IN SUPPORT OF PETITIONER

_____________

Russell G. Ryan

Counsel of Record

Markham S. Chenoweth

NEW CIVIL LIBERTIES ALLIANCE

4250 N. Fairfax Drive, Suite 300

Arlington, Virginia 22203

(202) 869-5210

russ.ryan@ncla.legal

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES ...................................... ii

INTEREST OF AMICUS CURIAE ........................... 1

SUMMARY OF ARGUMENT.................................... 3

ARGUMENT .............................................................. 4

I. IMPORTANT CONTEXTUAL BACKGROUND ............... 4

II. A RECEIVER S VAST POWER AND DISCRETION

RENDER HIM A CONSTITUTIONAL OFFICER ......... 7

III. CONGRESS HAS NOT, Y LAW VESTED

COURTS WITH THE POWER TO APPOINT

RECEIVERS WHO WIELD THE SIGNIFICANT

AUTHORITY OF INFERIOR OFFICERS .................... 9

CONCLUSION ......................................................... 13

ii

TABLE OF AUTHORITIES

Page(s)

Cases

Buckley v. Valeo,

424 U.S. 1 (1976) ...................................................... 7

Freytag v. Commissioner,

501 U.S. 868 (1991) .................................................. 7

Lucia v. SEC,

585 U.S. 237 (2018) .............................................. 3, 7

Morrison v. Olson,

487 U.S. 654 (1988) .......................................... 3, 8, 9

SEC v. Lauer,

No. 9:03-cv-80612, 2015 WL 11004892 (S.D. Fla.

2015) ........................................................................ 8

SEC v. Malek,

................................. 9

SEC v. Wencke,

622 F.2d 1363 (9th Cir. 1980) ................................... 9

Siegel v. Fitzgerald,

596 U.S. 464 (2022) .............................................. 4, 5

United States v. Coughlin,

No. 4:12-cr-166, 2013 WL 1506990 (E.D. Tex.

2013) ........................................................................ 8

Statutes

11 U.S.C. § 362 ............................................................ 7

12 U.S.C. § 1821(c)..................................................... 10

12 U.S.C. § 191(a) ...................................................... 10

12 U.S.C. § 2183(b) .................................................... 10

12 U.S.C. § 4617 ........................................................ 10

iii

15 U.S.C. § 78u(d)(5) .................................................. 11

15 U.S.C. § 80a-41(d) ................................................. 11

28 U.S.C. § 3103 .......................................................... 9

28 U.S.C. § 546(d) ........................................................ 4

28 U.S.C. § 631 ............................................................ 9

28 U.S.C. § 751 .......................................................... 10

28 U.S.C. § 752 .......................................................... 10

28 U.S.C. § 753 .......................................................... 10

28 U.S.C. § 754 .......................................................... 10

28 U.S.C. § 755 .......................................................... 10

Public Utility Holding Company Act of 1935,

Pub. L. No. 74-333, 49 Stat. 803 ............................. 11

Other Authorities

Marcus F. Salitore,

SEC Receivers vs. Bankruptcy Trustees:

Liquidation by Instinct or Rule,

AM. BANKR. INST. J., Oct. 2003 .................................. 6

MaryBeth C. Allen,

Note, Take From the Fraudulent and Give to the

Criminal Securities Fraud Cases,

21 AM. BANKR. INST. L. REV. 191 (2013) ................ 5, 8

Megan Smith,

Note, SEC Receivers and the Presumption of

Innocence: The Problem with Parallel

Proceedings in Securities Cases and the Ever

Increasing Powers of the Receivers,

11 HOU. BUS. & TAX L.J. 203 (2011) .......................... 8

Receiverships,

SEC (Feb. 12, 2025) .................................................. 6

iv

Reid Skibell & Joseph Gallagher,

Choosing Between an SEC Receivership and

Bankruptcy,

LAW360 (Mar. 11, 2021, 1:25 PM) ............................. 5

Sean Kelly,

Note, SEC v. Creditors: Why SEC Civil

Enforcement Practice Demonstrates the Need for a

Reprioritization of Securities Fraud Claims in

Bankruptcy,

92 ST. JOHN S L. REV. 915 (2018) ............................... 5

SEC,

Investor Bulletin: 10 Things to Know About

Receivers,

INVESTOR.GOV (Aug. 27, 2015)................................... 8

Rules

S. Ct. R. 37.6 ............................................................... 1

Constitutional Provisions

U.S. CONST. art. I, § 8, cl. 4........................................... 4

U.S. CONST. art. II, § 2, cl. 2 ......................................... 3

1

INTEREST OF AMICUS CURIAE1

nonpartisan, nonprofit civil rights organization and

public-interest law firm devoted to defending

depredations. Professor Philip Hamburger founded

NCLA to challenge multiple constitutional defects in the

modern administrative state through original litigation,

amicus curiae briefs, and other advocacy.

include rights at least as old as the U.S. Constitution

itself, such as the right to a jury trial, to due process of

legislators through constitutionally prescribed channels

(i.e., the right to self-government). These selfsame civil

rights are also very contemporary and in dire need of

renewed vindication precisely because Congress,

executive branch officials, administrative agencies, and

even some courts have neglected them for so long.

NCLA aims to defend civil liberties primarily by

asserting constitutional constraints against the modern

administrative state. Although Americans still enjoy the

shell of their Republic, a very different sort of

government has developed within it a type that the

Constitution was designed to prevent.

This

1 In accordance with Supreme Court Rule 37.2, NCLA provided

timely notice to counsel of record for the parties of its intention

to file this brief.

brief, and no party, party counsel, or person other than amicus

curiae made a monetary contribution intended to fund this

See S. Ct. R. 37.6.

2

As a staunch defender of constitutional liberties, the

constitutional separation of powers, and the rule of law,

NCLA has a strong interest in the

of this case. Moreover, as a key advocate in cases

including Lucia v. SEC, SEC v. Cochran, SEC v. Jarkesy,

and Relentless v. Department of Commerce, which

involved related issues, NCLA has a unique perspective

to offer the Court.

As explained herein, NCLA is concerned that the

Fifth Circuit and other federal courts are routinely

overlooking

important

structural

constitutional

problems that arise from increasingly routine judicial

appointments of receivers like the one appointed in this

case. One particular problem relevant to this case, as

currently

appointment of the receiver appears to contravene the

Appointments Clause of the Constitution. NCLA

respectfully urges the Court to consider that

constitutional problem while granting the petition for a

writ of certiorari.

3

SUMMARY OF ARGUMENT

NCLA agrees with Petitioner that the statute the

district court presumably relied on to authorize its

appointment of the receiver Section 21(d)(5) of the

Securities Exchange Act of 1934 cannot plausibly be

read to vest courts with power to appoint a receiver

having the degree of sweeping powers granted in this

case.2 NCLA writes separately to highlight a structural

constitutional problem that arises from this absence of

statutory authority:

order violated the Appointments Clause.

Lucia v. SEC, 585 U.S. 237, 241

(2018) (quoting U.S. CONST. art. II, § 2, cl. 2). One such

U.S. CONST. art. II, § 2, cl. 2. But this

method is permissible only if Congress has vested the

that is, by enacting a

statute that authorizes the appointment. For example,

in Morrison v. Olson, 487 U.S. 654 (1988), the Court

upheld the constitutionality of a statute that empowered

Id. at 670-77.

Similarly, Congress has statutorily empowered district

courts to appoint United States Attorneys for their

2 Neither the district court nor the Fifth Circuit cited any statute

as authori

The Petition

reasonably identifies and addresses Exchange Act § 21(d)(5) as

the most plausible source of any such statutory authority. That

statute was the only one SEC cited when seeking appointment

of the receiver.

4

districts under certain limited circumstances. 28 U.S.C.

§ 546(d).

The district court

bestowed on

the receiver such a significant degree of authority and

discretion as to render him an officer of the United

jurisprudence. If, as the Petition amply demonstrates,

Congress has never enacted a law authorizing such

appointment, then

receiver was constitutionally invalid.

ARGUMENT

I. IMPORTANT CONTEXTUAL BACKGROUND

Although litigants and courts rarely mention it, the

fundamental design of receiverships like the one

challenged by the Petition is apparent. At core, such

receiverships are an expedient ploy by Respondent

enabled

by courts to circumvent the uniform, comprehensive,

and predictable bankruptcy process established by

Congress through decades of legislative trial and error.

Receiverships in SEC law-enforcement cases function to

evade the carefully crafted statutory bankruptcy process

and replace it with an ad hoc, non-statutory shadow

proce

blessed this end run around the statutory bankruptcy

process, but the Petition presents an ideal and long

overdue vehicle for the Court to step in and either stop

it or at least erect appropriate constitutional guardrails.

The Constitution vests in Congress not courts the

uniform Laws on the subject of

U.S.

CONST. art. I, § 8, cl. 4. This Court has repeatedly

confirmed that the language of this Bankruptcy Clause

is broad and

5

See, e.g.,

Siegel v. Fitzgerald, 596 U.S. 464, 473 (2022) (cleaned

up). The Founders were keenly aware of the inconsistent

patchwork of bankruptcy laws that existed first among

the various colonies and later among the several states,

and they plainly thought it best to have a uniform system

to sort out the complexities and competing interests

inherent in situations of insolvency. Congress has

exercised its constitutional power through various

iterations of what is now the Bankruptcy Code, which

comprehensively establishes a uniform system of laws

and processes indeed an entire Article I court system

specifically designed to deal with situations of insolvency

like the one that led to this litigation. Three years ago,

this Court reemphasized the constitutional importance

of uniformity in this area of the law. See id. at 477-78.

SEC has never liked what Congress enacted in this

area. Among other things, SEC thinks Congress was

wrong to assign the lowest creditor priority to equity

shareholders of bankrupt companies; it thinks those

shareholders should sit at the top the pecking order, not

the bottom. See generally Reid Skibell & Joseph

Gallagher, Choosing Between an SEC Receivership and

Bankruptcy, LAW360 (Mar. 11, 2021, 1:25 PM),

https://www.law360.com/articles/1363507/choosingbetween-an-sec-receivership-and-bankruptcy

preferred path has increasingly been to force securities

SEC v.

Creditors: Why SEC Civil Enforcement Practice

Demonstrates the Need for a Reprioritization of Securities

Fraud Claims in Bankruptcy, 92 ST. JOHN S L. REV. 915,

919 (2018)

arguments in passing the Bankruptcy Reform Act of

1978); MaryBeth C. Allen, Note, Take From the

6

Fraudulent and Give to the Defrauded:

in Asset Recovery in Criminal Securities Fraud Cases, 21

AM. BANKR. INST. L. REV. 191, 199 (2013)

is very analogous in its goals and functionality to a

bankruptcy trustee; however the SEC receiver is a

means to collect the assets to restore victims of fraud

;

Marcus F. Salitore, SEC Receivers vs. Bankruptcy

Trustees: Liquidation by Instinct or Rule, AM. BANKR.

INST. J., Oct. 2003

without the supporting structure of the Bankruptcy

Code, Rules, and precedent,

liquidation becomes ad hoc

.

And so, over the past half-century or so, SEC has

successfully enlisted courts to build an ad hoc shadow

bankruptcy process whereby SEC recommends and

district courts appoint private citizens often the same

person in successive cases as receivers to perform

functions that mimic those typically performed by

trustees in bankruptcy cases (applying bankruptcy law).

of which have been ongoing for more than a decade. See

Receiverships, SEC, https://www.sec.gov/enforcementlitigation/receiverships (Feb. 12, 2025). Importantly,

these receivers are court-appointed and court-supervised

judicial officers, whereas bankruptcy trustees are

appointed and supervised by executive branch officials

under the supervision of the Attorney General.

Over time, SEC has convinced courts to bestow

increasingly sweeping powers on these receivers. They

safeguard assets

until the court resolves the dispute between SEC and the

7

defendant. As this case demonstrates, receivers in SEC

cases are now routinely empowered to manage, control,

and operate multiple corporations; sell and lease

company property; waive attorney-client and other

privileges; hire attorneys, accountants, brokers and

other agents; issue subpoenas and other compulsory

information requests; conduct investigations; commence

and prosecute lawsuits against third parties in federal

and state courts; settle claims; and compensate

themselves, their staffs, and their appointed sub-agents

using the corporate assets they are appointed to

safeguard and manage.

receivership order includes a now-routine provision that

explicitly stays all bankruptcy proceedings involving the

receiver or any property under the asserted control of the

receiver. App. 91a-92a. This provision further subverts

in the Bankruptcy Code

that, with limited exceptions, disputes involving an

insolvent person or entity should be litigated in a

bankruptcy court or automatically stayed in deference to

the bankruptcy process. 11 U.S.C. § 362.

II.

A RECEIVER S VAST POWER AND DISCRETION

RENDER HIM A CONSTITUTIONAL OFFICER

An appointee endowed with the kind of vast,

sweeping executive power the district court gave the

receiver in this case is, at a minimum, an inferior officer

within the meaning of the Appointments Clause. This

Court has held that officers are those who exercise

laws of the United States, regardless of whether they can

issue final, binding decisions on behalf of the

government. See, e.g., Lucia, 585 U.S. at 245-46 (2018);

8

Freytag v. Commissioner, 501 U.S. 868, 881 (1991);

Buckley v. Valeo, 424 U.S. 1, 126 (1976).

The receiver appointed in this case clearly satisfies

empowers the receiver to, among other things, (1) take

corporations, App. 72a-74a; (2) to manage, control, and

operate those corporations, App. 76a; (3) to sell or lease

any property of those corporations, App. 92a-93a; (4) to

waive attorney-client and other privileges, App. 94a;

(5) to hire attorneys, accountants, brokers, and other

agents, App. 76a; (6) to issue subpoenas and other

compulsory information requests, App. 77a; (7) to

conduct investigations, App. 93a-94a; (8) to commence

and prosecute lawsuits in federal and state courts, App.

77a, 93a; (9) to settle claims, App. 77a; and (10) to

compensate himself, his staff, and his appointed subagents from the corporate assets he was appointed to

safeguard and manage, App. 98a.

SEC has elsewhere explicitly conceded that these are

Investor Bulletin: 10 Things to

Know About Receivers, INVESTOR.GOV (Aug. 27, 2015).3

So have courts and commentators. See, e.g., SEC v.

Lauer, No. 9:03-cv-80612, 2015 WL 11004892, at *2 (S.D.

Fla. 2015); United States v. Coughlin, No. 4:12-cr-166,

2013 WL 1506990, at *1 (E.D. Tex. 2013); Allen, supra at

200 (receivers in SEC cases are

;

Megan Smith, Note, SEC Receivers and the Presumption

of Innocence: The Problem with Parallel Proceedings in

Securities Cases and the Ever Increasing Powers of the

Receivers, 11 HOUS. BUS. & TAX L.J. 203, 213 (2011)

3 https://www.investor.gov/introduction-investing/general-

resources/news-alerts/alerts-bulletins/investor-bulletins-87.

9

.

Moreover, the receiver s powers in this case are not

just judicial in nature. They include the power to

conduct investigations, pursue litigation in federal and

state courts, and negotiate settlements of claims as an

agent of the government quintessentially executive

powers. See, e.g., Morrison, 487 U.S. at 691

functions of a court-appointed independent counsel are

executive in nature); id. at 706 (Scalia, J., dissenting)

Unlike in Morrison, however, there

is an obvious incongruity

appointment here because, among other things, all of the

ongoing executive functions are performed

under the direction and supervision of the appointing

judicial officer (not SEC or anyone else in the executive

branch). Worse yet, much of the litigation pursued by

the receiver is purposefully brought before and decided

by the same judge who appointed and supervises the

receiver.

III.

Y LAW

CONGRESS HAS NOT,

VESTED

COURTS WITH THE POWER TO APPOINT

RECEIVERS WHO WIELD THE SIGNIFICANT

AUTHORITY OF INFERIOR OFFICERS

Neither the district court nor the Fifth Circuit cited

any statute as purported authority for appointing the

receiver. Other courts have candidly admitted that no

such statute exists. See, e.g., SEC v. Malek, 397 F. App x

711, 713 (2d Cir. 2010)

neither the

Securities Act of 1933 nor the Securities Exchange Act of

1934 expressly vests the power to appoint receivers in

the district courts SEC v. Wencke, 622 F.2d 1363, 1369

(9th Cir. 1980) (

10

a receivership or grant other forms of ancillary relief does

not in the first instance depend on a statutory grant of

power from the securities laws

Of course, Congress knows how to write statutes that

authorize the appointment of receivers and similar

judicial adjuncts. For example, 28 U.S.C. § 3103 gives

district courts express authority and detailed guidance

in appointing receivers in certain government debtcollection cases, of which this case is not one. Likewise,

28 U.S.C. § 631 empowers district courts to appoint

Magistrate Judges to assist them with certain judicial

functions detailed in the ensuing statutory provisions.

Indeed, statutes also expressly authorize district courts

to appoint their clerks of court, id. at § 751, their law

clerks and secretaries, id. at § 752, their court reporters,

id. at § 753, and their criers and bailiffs, id. at § 755, even

though few, if any, of these appointees exercise the

degree

constitutional officers.

To be sure, a nearby code section alludes to receivers

already lawfully appointed in cases involving property,

real, personal, or mixed, situated in different districts.

Id. at § 754.4 But even that provision does not in stark

linguistic contrast with the above-cited surrounding code

sections that expressly vest appointment power

purport to vest courts with the antecedent power to

appoint such receivers, least of all the type of receivers

typically appointed in SEC law-enforcement cases.

Rather, § 754 is best read as presupposing a valid

appointment under another statute for example, the

above-referenced 28 U.S.C. § 3103, or one of the many

Section 754 also presumably contemplates litigants in

diversity-of-citizenship cases who were validly appointed as

receivers under state law.

4

11

other federal statutes that expressly authorize the

appointment of receivers under specified circumstances.

See, e.g., 12 U.S.C. § 191(a) (authorizing Comptroller of

the Currency to appoint receivers for uninsured national

banks); 12 U.S.C. § 2183(b) (authorizing the Farm Credit

Administration Board to appoint the Farm Credit

System Insurance Corporation as receiver for a Farm

Credit institution under specified circumstances); 12

U.S.C. § 1821(c) (authorizing appointment of FDIC as

receiver for distressed federal depository institutions); 12

U.S.C. § 4617 (authorizing Director of Federal Housing

Finance Agency to appoint that agency as receiver for

certain regulated entities).

Notably, Congress also knows how to statutorily

empower courts to appoint receivers in other securitieslaw contexts not applicable here. For example, when

enacting the now-repealed Public Utility Holding

Company Act of 1935 (a year after enacting the

Exchange Act), Congress expressly provided that in any

proceeding in federal court under the act

constitute and appoint the Commission as sole trustee or

receiver, subject to the directions and orders of the

court ... . Pub. L. No. 74-333, § 11(f), 49 Stat. 803, 822.

Likewise, the Investment Company Act of 1940 still

provides that in proceedings to enforce certain provisions

of that statute:

the court as a court of equity may, to the extent it

deems necessary or appropriate, take exclusive

jurisdiction and possession of the investment

company or companies involved and the books,

records, and assets thereof, wherever located; and the

court shall have jurisdiction to appoint a trustee, who

with the approval of the court shall have power to

12

dispose of any or all of such assets, subject to such

terms and conditions as the court may prescribe.

15 U.S.C. § 80a-41(d).

No remotely similar language empowers courts to

appoint receivers in SEC enforcement cases like this one

brought under the parallel provisions of the Exchange

Act and the Securities Act of 1933. In the district court,

SEC pointed to Exchange Act § 21(d)(5), which vaguely

provides

In any action or proceeding brought or

instituted by the Commission under any provision of the

securities laws, the Commission may seek, and any

Federal court may grant, any equitable relief that may

be appropriate or necessary for the benefit of investors.

15 U.S.C. § 78u(d)(5). But the text of that section

bears no resemblance to the explicit

language Congress has used when authorizing court

appointments of receivers and other inferior officers

pursuant to the Appointments Clause. Moreover, there

is no evidence in the legislative history of § 21(d)(5)

added by the Sarbanes-Oxley Act of 2002, decades after

SEC had already been successfully convincing courts to

appoint receivers without it or any other statutory

authority that the provision was meant to vest district

courts with the power to appoint receivers in SEC cases.

Because no statute vests in district courts the power

to appoint receivers with authority significant enough to

render them inferior officers,

appointment of the receiver in this case violated the

Appointments Clause of Article II of the Constitution.5

5

Even if such a statute existed, it would likely violate the

13

CONCLUSION

For the foregoing reasons, amicus curiae NCLA

respectfully urges the Court to grant the petition for a

writ of certiorari.

Respectfully submitted,

Russell G. Ryan

Counsel of Record

Markham S. Chenoweth

NEW CIVIL LIBERTIES ALLIANCE

4250 N. Fairfax Drive, Suite 300

Arlington, Virginia 22203

(202) 869-5210

russ.ryan@ncla.legal

Counsel for Amicus Curiae

November 17, 2025

because it would ensure wildly disparate outcomes for similarly

situated debtors based entirely on whether, in the race to the

courthouse, SEC arrived at the district court before the debtor

or its creditors arrived at the bankruptcy court.