Jeffrey Mohlman v. Fin. Indus. Regulatory Auth., 977 F.3d 556

Plaintiff, a licensed securities professional, communicated with investors about WMA Enterprises but did not sell securities or receive compensation; he alerted investors after learning in 2014 that WMA was a Ponzi scheme.
FINRA investigated; Plaintiff gave one day of testimony and, before a second scheduled day, signed a Letter of Acceptance, Waiver and Consent (AWC) on Sept. 17, 2015 consenting to a permanent bar and waiving procedural rights; FINRA’s National Adjudicatory Council accepted the AWC.
Four years later (2019) Plaintiff sued in Ohio state court alleging FINRA fraudulently failed to consider mitigating factors and sought damages; defendants removed to federal court.
Defendants moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim based on Plaintiff’s failure to exhaust FINRA/Exchange Act administrative remedies.
The district court granted dismissal; the Sixth Circuit affirmed, holding Plaintiff failed to exhaust administrative remedies and declining to reach the merits.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Exchange Act/FINRA procedures are the exclusive review route before judicial relief	Exchange Act not exclusive; may sue under Ohio Constitution for damages	FINRA/Exchange Act require exhaustion of administrative remedies before court review	Court: exhaustion applies; dismissal affirmed for failure to exhaust
Effect of AWC (waiver) on appellate review	AWC does not bar judicial relief for alleged failure to consider mitigating factors	Even with procedural waiver, Plaintiff could have sought NAC and SEC review; AWC accepted and final	Court: Plaintiff could have pursued NAC/SEC review; failure to do so fatal
Whether Saad supports setting aside sanction for failing to consider mitigation	Saad shows courts can set aside FINRA sanctions for failure to consider mitigation	Saad is inapposite because that plaintiff exhausted administrative remedies first	Court: Saad inapplicable here because Plaintiff did not follow administrative process
Whether exhaustion requirement is jurisdictional and/or excusable	(argued implicitly) exceptions or non-jurisdictional treatment might allow suit	Even if non-jurisdictional, Plaintiff forfeited any exception argument by not raising it below	Court: Need not decide jurisdictional question; Plaintiff forfeited any exception; dismissal stands

Swirsky v. Nat’l Ass’n of Sec. Dealers, 124 F.3d 59 (1st Cir.) (comprehensiveness of Exchange Act review supports applying exhaustion)
First Jersey Sec., Inc. v. Bergen, 605 F.2d 690 (3d Cir.) (applying exhaustion to challenges under NASD/Exchange Act)
Citadel Sec., LLC v. Chicago Bd. Options Exch., Inc., 808 F.3d 694 (7th Cir.) (affirming dismissal for failure to exhaust FINRA procedures)
Saad v. S.E.C., 718 F.3d 904 (D.C. Cir.) (requires exhaustion; court reviewed mitigation issue after administrative appeals)
Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41 (U.S.) (longstanding exhaustion-of-remedies principle)
McKart v. United States, 395 U.S. 185 (U.S.) (central purpose of exhaustion: avoid premature interruption of administrative process)
Avocados Plus Inc. v. Veneman, 370 F.3d 1243 (D.C. Cir.) (discussing when exhaustion is jurisdictional vs. waivable)