Jarkesy v. Securities & Exchange Commission
419 U.S. App. D.C. 394
| D.C. Cir. | 2015Background
- The SEC initiated administrative enforcement proceedings under the securities laws (post-Dodd-Frank) against George Jarkesy, Jr. and Patriot28, alleging securities fraud and seeking disgorgement, penalties, bars, and other relief.
- An ALJ conducted hearings and issued an initial decision finding violations; Jarkesy appealed to the Commission and also filed a district-court suit to enjoin the administrative proceeding on constitutional and APA grounds.
- Jarkesy’s district-court complaint alleged prejudgment (due process), denial of Seventh Amendment jury rights (equal protection/fundamental-rights theory), class-of-one equal protection, improper ex parte communications (APA), and Brady/discovery violations under the SEC Rules of Practice.
- The district court dismissed for lack of subject-matter jurisdiction, concluding the securities-laws administrative-and-review scheme implicitly precluded concurrent district-court review.
- The D.C. Circuit reviewed de novo, applied the Thunder Basin framework, and affirmed: the securities statutory scheme channels review to the agency and then to the courts of appeals after a final Commission order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Congress implicitly precluded district-court jurisdiction over pre-enforcement challenges to ongoing SEC administrative proceedings | Jarkesy: district court may hear his constitutional and APA challenges now; the administrative route would deny meaningful review and is inadequate for some facial constitutional claims | SEC: securities statutory scheme provides a detailed, exclusive route (agency decision, Commission review, then exclusive court-of-appeals review); plaintiffs must use that route | Held: Jurisdiction in district court is precluded; litigant must pursue Commission review and then petition a court of appeals if aggrieved |
| Whether Jarkesy’s constitutional claims are "of the type" Congress intended to be reviewed in the statutory scheme (Thunder Basin step two) | Jarkesy: claims (non-delegation, Seventh Amendment, selective prosecution/equal protection, prejudgment) are not wholly collateral, and some require immediate adjudication to avoid irreparable harm | SEC: claims arise from the administrative proceeding itself and can be meaningfully reviewed on petition for review to the court of appeals; courts can remand for further factfinding if needed | Held: Claims are not wholly collateral, can obtain meaningful review after a final order, and fall within the statutory review scheme |
| Whether agency/expert competence is inadequate to resolve constitutional challenges | Jarkesy: SEC lacks constitutional expertise to decide some claims (e.g., non-delegation) | SEC: Commission and courts of appeals can address threshold and interpretive issues; the agency can narrow or moot constitutional questions in the first instance | Held: Agency expertise suffices for initial resolution or development; absence of perfect agency expertise does not defeat preclusion |
| Whether exceptions (Free Enterprise, McNary, or All Writs Act) permit immediate district-court review | Jarkesy: Free Enterprise and McNary permit pre-enforcement review where administrative route would be inadequate; All Writs Act could preserve appellate jurisdiction | SEC: those precedents are distinguishable; here the plaintiff is already in enforcement proceedings and can obtain review after a final order; All Writs cannot enlarge jurisdiction | Held: Distinguishing factors mean Free Enterprise and McNary do not apply; All Writs Act cannot create jurisdiction; no exception applies |
Key Cases Cited
- Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (framework for when Congress implicitly precludes district-court review in favor of an administrative scheme)
- Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477 (permitting pre-enforcement district-court review where plaintiffs were not already in agency enforcement and administrative review was impractical)
- Elgin v. Department of the Treasury, 567 U.S. 1 (explaining that facial constitutional claims can be channeled through an administrative scheme so long as meaningful review in an Article III court remains available)
- FTC v. Standard Oil Co. of California, 449 U.S. 232 (pre-enforcement challenge to agency complaint rejected; parties must usually await administrative adjudication)