Molchatsky v. United States, 713 F.3d 159

Investors who lost money in Bernard Madoff's scheme sue the United States and seek damages for SEC failures to detect the fraud.
Plaintiffs allege the SEC negligently failed to uncover Madoff's Ponzi scheme despite numerous complaints over about sixteen years.
They rely on an Inspector General report detailing eight specific SEC complaints and allegedly inadequate responses.
The district court dismissed the FTCA claims against the SEC under the Discretionary Function Exception (DFE).
The court also denied relief from judgment under Rule 60(b) and jurisdictional discovery requests.
The Second Circuit affirms, holding the DFE shields the SEC's discretionary investigative decisions from liability.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the DFE bars FTCA claims against the SEC	Molchat Sky argues SEC negligence is actionable	SEC discretion in investigations is immunized by the DFE	Yes; DFE bars claims

Berkovitz by Berkovitz v. United States, 486 U.S. 531 (U.S. 1988) (discretionary-function protection applies to policy-based decisions)
United States v. Gaubert, 499 U.S. 315 (U.S. 1991) (policymaking discretion to give immunity from FTCA suits)
Coulthurst v. United States, 214 F.3d 106 (2d Cir. 2000) (two-prong test for DFE: discretionary action and policy-based grounding)
Bd. of Trade of City of Chicago v. SEC, 883 F.2d 525 (7th Cir. 1989) (agency decisions about resource allocation are discretionary)
Gray v. Bell, 712 F.2d 490 (D.C. Cir. 1983) (court views agency actions as too intertwined with discretionary decisions)