ALPINE SECURITIES CORPORATION, APPELLANT v. FINANCIAL INDUSTRY REGULATORY AUTHORITY AND UNITED STATES OF AMERICA, APPELLEES
No. 23-5129
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 8, 2024 Decided November 22, 2024
Brian W. Barnes argued the cause for appellant. With him on the briefs were Maranda E. Fritz, David H. Thompson, and Athanasia O. Livas.
William P. Barr, Noel J. Francisco, Brian C. Rabbitt, and Anthony J. Dick were on the brief for amicus curiae American Free Enterprise Chamber of Commerce in support of appellant.
Russell G. Ryan and Andrew Morris were on the brief for amicus curiae New Civil Liberties Alliance in support of appellant.
Amir C. Tayrani argued the cause for appellee Financial Industry Regulatory Authority. With him on the brief were Alex Gesch and Max E. Schulman.
Joseph F. Busa, Attorney, U.S. Department of Justice, argued the cause for intervenor appellee United States. With him on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, and Mark B. Stern and Courtney Dixon, Attorneys. Gerard J. Sinzdak, Attorney, entered an appearance.
Zachary Knepper was on the brief for amicus curiae North American Securities Administrators Association, Inc. in support of appellees.
Alan L. Rosca was on the brief for amicus curiae Public Investor Advocate Bar Association in support of appellee.
Adam G. Unikowsky, Elizabeth B. Deutsch, and Arjun R. Ramamurti were on the brief for amici curiae National Futures Association, et al. in support of appellee.
David S. Flugman was on the brief for amicus curiae Benjamin P. Edwards in support of appellee.
Adam L. Deming, Mark D. Harris, and Margaret A. Dale were on the brief for amici curiae the Depository Trust Company, et al. in support of appellees.
Kevin King and Daniel G. Randolph were on the brief for amicus curiae Securities Exchanges in support of appellee.
Jonathan E. Barbee and Robert K. Kry were on the brief for amicus curiae Municipal Securities Rulemaking Board in support of neither party.
Before: SRINIVASAN, Chief Judge, MILLETT and WALKER, Circuit Judges.
Opinion for the Court filed by Circuit Judge MILLETT.
Opinion concurring in the judgment in part and dissenting in part filed by Circuit Judge WALKER.
MILLETT, Circuit Judge: The United States securities industry is regulated by both private entities and the federal government. These private regulators, referred to as self-regulatory organizations, date back centuries to when groups of securities traders adopted self-governing rules by which they would conduct business and ensure public trust in their operations.
Today, a private corporation, the Financial Industry Regulatory Authority (FINRA), regulates and oversees large parts of the securities industry. Congress, however, has overlain federal law on those private self-regulatory practices. As relevant here, federal law effectively requires most firms and individuals that trade securities to join FINRA as a condition of engaging in that business. Federal law, in turn, subjects FINRA to oversight by the Securities and Exchange Commission (SEC) and requires that FINRA ensure that its members comply both with FINRA‘s own rules and with federal securities laws.
While that lawsuit was pending, FINRA concluded that Alpine had violated the cease-and-desist order and initiated an expedited proceeding to expel Alpine from membership in FINRA. Alpine then sought a preliminary injunction from the district court against the expedited proceeding, arguing that FINRA is unconstitutional because its expedited action against Alpine violates either the private nondelegation doctrine or the
We now reverse only to the extent the district court allowed FINRA to expel Alpine with no opportunity for SEC review. Alpine is entitled to that limited preliminary injunction because it has demonstrated that it faces irreparable harm if expelled from FINRA and the entire securities industry before the SEC reviews the merits of FINRA‘s decision. Alpine has also demonstrated a likelihood of success on its argument that the lack of governmental review prior to expulsion violates the private nondelegation doctrine. We accordingly hold that FINRA may not expel Alpine either before Alpine has obtained full review by the SEC of the merits of any expulsion decision or before the period for Alpine to seek such review has elapsed.
At the same time, we hold that Alpine has not demonstrated that it will suffer irreparable harm from participating in the expedited proceeding itself as long as FINRA cannot expel Alpine until after the SEC conducts its own review. For that reason, Alpine has not shown that it is
As this case comes to us in a preliminary-injunction posture, we necessarily do not resolve the ultimate merits of any of Alpine‘s constitutional challenges, and our determination about Alpine‘s likelihood of success on the private nondelegation issue is based only on the early record in this case. We leave it to the district court on remand to determine the ultimate merits of Alpine‘s claims.
I
A
By way of background, the securities industry in the United States has engaged in extensive self-regulation for more than two centuries. Efforts to create organized, self-policing stock markets in the United States began in the late eighteenth century. See Stuart Banner, The Origin of the New York Stock Exchange, 1791–1860, 27 J. LEGAL STUD. 113, 114–115 (1998). The earliest effort came in 1791, when securities traders in New York agreed to abide by fourteen rules. Id. at 114. Those rules created auction procedures, required employment of a stockbroker, and developed a means for enforcing sales contracts. Id. at 114–115. Participants to the agreement who violated the rules would be barred from future transactions with other participants. Id. at 115. After the stock market crashed in 1792, these fourteen rules were succeeded by the well-known 1792 Buttonwood Agreement, in which a group of New York traders agreed, among other things, to regulate stock trade commissions. Id. As the story goes, the traders signed that agreement in the shade of a buttonwood tree—though that part of the story may be apocryphal. See id. at 115 n.3.
These exchanges functioned as private regulators in the early American securities industry. The New York Stock and Exchange Board took on an outsized role as the foremost stock exchange in the country. Banner, supra, at 119. Among other things, it adopted membership criteria, promulgated rules with which members had to comply, and developed a quasi-judicial system that employed panels of exchange members for adjudicating disputes. Id. at 120–126, 132–133. Members who violated the exchange‘s rules, such as by breaching sales contracts, could be suspended or expelled from the exchange and barred from doing business with its members. Id. at 122. In this way, the exchange both facilitated securities trading and promoted an image of trustworthiness and credibility to the public. Id. at 123, 140. This entire self-regulatory scheme was private, with the exchange funded through membership fees. Id. at 116.
For the next century, the securities industry remained largely autonomous. Then, after the catastrophic 1929 stock market crash and the ensuing Great Depression, Congress passed a series of laws regulating the securities industry, including the
Congress later realized that the SEC was underequipped to regulate securities trading that was taking place off the exchanges through informal networks of securities traders. See Smythe, supra, at 483. To address that problem, Congress passed the
To achieve its goal of cooperative regulation, the Maloney Act established registered securities associations—self-regulatory organizations registered with the SEC that are composed of brokers and dealers. See
In 1939, the National Association of Securities Dealers (NASD) became the nation‘s first registered securities association. Smythe, supra, at 477–478, 483–485. NASD‘s initial rules required its members to observe high standards of commercial honor and just and equitable principles of trade, and prohibited members from mak[ing] improper use of a customer‘s securities or funds. Paul S. Grant, The National Association of Securities Dealers: Its Origin and Operation, 1942 WIS. L. REV. 597, 602–603 (1942). NASD also regulated the commissions that its members could charge, generally deeming commissions above five percent to be unreasonable. In the Matter of the Rules of the Nat‘l Ass‘n of Sec. Dealers, Inc., Exchange Act Release No. 3574, 1944 WL 26641, at *1 (S.E.C. June 1, 1944).
Since 1938, Congress has repeatedly amended the Exchange Act to bolster the self-regulatory scheme by increasing government oversight while preserving self-regulatory organizations’ primary role in regulating the
In 1975, Congress initiated a major overhaul of the Exchange Act and drastically shifted the balance of rulemaking power in favor of Commission oversight. Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119, 1129 (9th Cir. 2005). The 1975 amendments require self-regulatory organizations to submit rule changes to the SEC for approval before they can go into effect. Id. at 1130; see
Then, in 1983, Congress made joining a self-regulatory organization mandatory for virtually all securities traders.
C
Today, FINRA is the only registered securities association in the United States. FINRA was formed after the SEC approved a merger between NASD and the New York Stock Exchange‘s enforcement arm. 72 Fed. Reg. 42,169, 42,169 (Aug. 1, 2007). FINRA is organized as a Delaware nonprofit corporation operated by private individuals and receives no funding from the federal government. Like early self-regulatory organizations, FINRA is financed entirely through fees, fines, penalties, and sanctions levied against its members. Second Am. Compl. ¶¶ 41, 52–53.
As required by federal law, FINRA promulgates rules for its members to follow. Some of FINRA‘s rules are almost
Under the Exchange Act, FINRA must enforce its rules against its members and provide a fair procedure for disciplining members who violate FINRA rules.
Typical FINRA enforcement actions take place before an internal FINRA panel and may involve multiple levels of review. See Saad v. SEC, 873 F.3d 297, 300 (D.C. Cir. 2017). FINRA members may appeal to a FINRA appellate body, the decisions of which may also be reviewed by the FINRA Board. Id. Final FINRA decisions may be appealed to the SEC, which generally performs its own review of the disciplinary action, and may modify, affirm, or set aside any part of FINRA‘s decision. Id.;
FINRA rules separately provide for expedited disciplinary proceedings for certain types of misconduct, including violating a previously issued FINRA order. See
II
A
Alpine Securities Corporation is a securities broker-dealer, meaning that it trades securities on behalf of others and for itself. See
In 2018, Alpine‘s finances took a turn for the worse. Alpine attributed its financial troubles in part to an earlier SEC enforcement action against Alpine for violation of federal securities laws that culminated in a $12 million civil penalty against Alpine for egregious * * * [and] illegal conduct on a massive scale. See SEC v. Alpine Sec. Corp., 413 F. Supp. 3d 235, 245 (S.D.N.Y. 2019), aff‘d, 982 F.3d 68 (2d Cir. 2020). To stem its losses, Alpine adopted a new business model, ending individual retail investment services and imposing significantly higher fees.
Deeming Alpine‘s misconduct intentional and egregious, the FINRA panel expelled Alpine from FINRA, issued a cease-and-desist order prohibiting Alpine from charging the fees and commissions the panel had held were unreasonable, and ordered it to pay restitution to injured customers. App. 240, 243, 246–248. Alpine appealed to FINRA‘s internal appellate body, which automatically stayed the expulsion order. FINRA Br. 13; see
Alpine‘s appeal within FINRA did not stay the cease-and-desist order against it because that order became final when the panel issued it. FINRA Br. 13–14; see
B
Alpine and an affiliate business subsequently sued FINRA in the United States District Court for the Middle District of Florida, challenging FINRA‘s constitutionality. Alpine raised challenges under the private nondelegation doctrine,
While Alpine‘s suit was pending, FINRA received reports that Alpine was continuing to charge fees and commissions in violation of the unchallenged cease-and-desist order. FINRA Br. 14. FINRA‘s enforcement department then opened a second investigation that led to FINRA initiating an expedited disciplinary proceeding against Alpine. FINRA‘s complaint alleged that Alpine had violated the cease-and-desist order more than 35,000 times by charging over $4 million in unreasonable fees and commissions. App. 251. The complaint alleged only violations of internal FINRA rules; it did not allege any violations of federal securities laws or regulations.
Back in district court where its lawsuit against FINRA was pending, Alpine sought a preliminary injunction against FINRA‘s expedited proceeding. The district court denied that request. Scottsdale Cap. Advisors Corp. v. FINRA, 678 F. Supp. 3d 88, 94 (D.D.C. 2023). As relevant here, the court held that FINRA is a private entity and not part of the government, so the
This court granted Alpine an emergency injunction pending appeal, enjoining FINRA‘s expedited proceeding against Alpine. Alpine Sec. Corp. v. FINRA, No. 23-5129, 2023 WL 4703307, at *1 (D.C. Cir. July 5, 2023).
The district court had jurisdiction under
A preliminary injunction is an extraordinary remedy never awarded as of right. Winter v. Natural Res. Def. Council, 555 U.S. 7, 24 (2008). A party requesting a preliminary injunction must show that (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in [its] favor; and (4) the issuance of a preliminary injunction is in the public interest. Changji Esquel Textile Co. Ltd. v. Raimondo, 40 F.4th 716, 721 (D.C. Cir. 2022) (quoting Winter, 555 U.S. at 20).
We review the district court‘s weighing of those preliminary-injunction factors for an abuse of discretion. We review any questions of law underlying the decision de novo. Abdullah v. Obama, 753 F.3d 193, 197–198 (D.C. Cir. 2014).
IV
Alpine makes its two constitutional arguments in the alternative—either (1) FINRA is a private entity that the government has invested with too much power, in violation of the private nondelegation doctrine, or (2) FINRA is a governmental entity, in which case its expedited proceeding violates the
We hold that Alpine is entitled to a limited preliminary injunction because it has demonstrated a likelihood of success on the merits of its private nondelegation claim to the extent that FINRA can unilaterally expel a member and, in so doing, bar the expelled entity from engaging in stock trading, all without governmental superintendence or control. Given that federal securities law generally transforms FINRA‘s membership decision into a flat legal prohibition on trading securities at all, the absence of SEC review before such a decision takes effect likely runs afoul of the private nondelegation doctrine, which requires that a private entity statutorily delegated a regulatory role be supervised by a government actor. In addition, the remaining preliminary-injunction factors favor granting an injunction. Alpine faces potential expulsion from FINRA, which effectively amounts to being barred from the securities industry. Under federal law, expulsion would likely put Alpine out of business, and would do so before the SEC performs a full review of FINRA‘s decision.
A
To begin, we find that Alpine has demonstrated that it is likely to prevail on its private nondelegation claim to the extent that FINRA‘s expulsion decision can, due to federal law, expel it from the securities industry. See Winter, 555 U.S. at 20.
1
Congress has long delegated regulatory authority to private entities. For example, in the early 1800s, Congress delegated significant economic regulatory authority to the Bank of the United States, a private entity, including the
For a delegation of governmental authority to a private entity to be constitutional, the private entity must act only as an aid to an accountable government agency that retains the ultimate authority to approve[], disapprove[], or modif[y] the private entity‘s actions and decisions on delegated matters. Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388, 399 (1940); see Association of American R.R.s v. Department of Transp., 721 F.3d 666, 671 (D.C. Cir. 2013) (Amtrak I), vacated on other grounds, 575 U.S. 43 (2015); see also Association of American R.R.s v. Department of Transp., 896 F.3d 539, 546 (D.C. Cir. 2018) (private delegation constitutional where government agency exercise[s] authority and surveillance over the private entity) (quotation marks omitted); Oklahoma v. United States, 62 F.4th 221, 228–229 (6th Cir. 2023) (similar);
Typically, SEC oversight of FINRA disciplinary actions involves the SEC conduct[ing] its own review of any final decision or sanction. Saad, 873 F.3d at 300; see
2
Review of expulsions imposed through FINRA‘s expedited proceedings, however, functions differently. Alpine has shown, on the record before us, that the SEC does not exercise ultimate control over FINRA‘s decisions to expel its members in expedited proceedings because those orders take effect immediately, before the SEC can review them, and the severe consequences associated with expulsion can make any later review by the SEC a largely academic exercise.
To begin, the SEC does not conduct any review of an expulsion order in an expedited proceeding before it goes into
Yet delayed SEC review of expulsion orders will almost always be too little too late. With limited exceptions, federal law prohibits entities from trading securities unless they are a member of a registered securities association.
To be sure, the SEC can stay the effectiveness of an expulsion order. See
At oral argument, counsel for FINRA represented that the SEC granted Alpine a stay in two business days in a prior FINRA disciplinary matter. Oral Arg. Tr. 58:10–14. That is a quick turnaround, but that stay appears to have been the discretionary issuance of an interim, administrative stay just to allow for full consideration of Alpine‘s stay motion. Alpine Sec. Corp., Exchange Act Release No. 86719, 2019 WL 3933691, at *1 (S.E.C. Aug. 20, 2019). Plus, this preliminary record does not reveal how often such interim stays are entered or the standard for their issuance. Full consideration of stay motions appears to take longer, with the SEC taking weeks or even months before acting. See, e.g., Michael Clark, Exchange Act Release No. 92521, 2021 WL 3210138, at *1 (S.E.C. July 29, 2021) (denying stay three months after filing); Scottsdale Cap. Advisors Corp., Exchange Act Release No. 83783, 2018 WL 3738189, at *1 (S.E.C. Aug. 6, 2018) (granting stay two weeks after filing). Because expulsion from FINRA carries with it a moratorium on all securities trading, even a few days or weeks may be too long for an expelled FINRA member to stay afloat.
Stays are also not easily obtained. Like courts, the SEC starts from the premise that a stay is an extraordinary
To be sure, if a stay is granted, the ensuing SEC review would be plenary. See PAZ Sec., 494 F.3d at 1064. But that “if“—and the time it takes to get there—means that no SEC review takes place until after the effects of any expulsion have been felt.
Second, the SEC‘s granting or denying of a stay is not a decision on the merits. The private nondelegation doctrine requires that a government actor be able to “approve[], disapprove[], or modif[y]” a private actor‘s decisions on delegated matters. See Adkins, 310 U.S. at 388, 399; Amtrak I, 721 F.3d at 671. In reviewing a stay application, however, the SEC does none of those things. Instead, the SEC has been explicit that a decision on a stay application does not decide the merits, and that “[a]ny final resolution must await the Commission‘s determination of the merits of [the underlying] appeal.” Scottsdale Cap. Advisors, 2018 WL 3738189, at *4 (quoting Bloomberg L.P., Exchange Act Release No. 83755, 2018 WL 3640780, at *7 (S.E.C. July 31, 2018)); see Alpine Sec., 2019 WL 3933691, at *1 (“[O]ur determination to grant this interim stay should not be interpreted as suggesting that we have decided any matter regarding this appeal[.]“).
So if the SEC reviews FINRA‘s expulsion orders at all, it does so only through a stay proceeding that disfavors immediate relief for the expelled member and does not decide the merits. That falls short of what the private nondelegation doctrine requires: an accountable government actor that “retains the discretion to approve, disapprove, or modify” FINRA‘s delegated decisions. Amtrak I, 721 F.3d at 671 (formatting modified); see Adkins, 310 U.S. at 388.
The government points out that the SEC has some statutory authority to waive the requirement that a trader be a member of a registered securities association. See
3
The dissenting opinion favors a broader injunction that would prevent FINRA from policing its member‘s misconduct at all. In doing so, the dissenting opinion goes far beyond even Alpine‘s nondelegation arguments. Remember that FINRA is not enforcing any federal law or SEC regulation against Alpine in the underlying proceeding. Yet the dissenting opinion reasons that FINRA nonetheless runs afoul of the private
That is incorrect on multiple fronts. To start, remember that, in this case, FINRA is not alleging or seeking to enforce any federal law or regulation. Its complaint is that Alpine failed to comply with a prior FINRA cease-and-desist order that rested solely on findings of noncompliance with FINRA‘s internal rules. App. 250-265. And Alpine chose not to seek SEC review of that cease-and-desist order. With the exception of the expulsion order addressed above, the dissenting opinion‘s list of activities that it equates with the exercise of “significant executive authority” refers simply to FINRA‘s own internal procedures for investigating member compliance with FINRA‘s membership rules. In addition, any fines ordered by FINRA are paid to FINRA, not to the United States Treasury. Second Am. Compl. ¶¶ 41, 52-53; Financial Guiding Principles, FINRA, at 2, https://perma.cc/SAB6-CZ49. Many of those measures, including the conduct of investigative hearings, predate any congressional involvement with private securities regulators. Banner, supra, at 123-124 (fines); Constitution of the New York Stock & Exchange Board § 15 (hearings). They are not an authority bestowed by the federal government.
Next, the dissenting opinion raises a nondelegation argument that Alpine itself has not advanced. So that cannot provide a likelihood of success to support injunctive relief. U.S. ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 497 (D.C. Cir. 2004) (arguments not raised on appeal are forfeited).
The dissenting opinion notably cites just one district court opinion applying its “significant executive authority” test to a private nondelegation challenge. Dissenting Op. at 8 n.28. An argument never advanced by the party requesting a preliminary injunction and unsupported by a single case from the Supreme Court, this court, or any appellate court cannot establish the likelihood of success necessary to permit the issuance of a preliminary injunction.
B
The remaining preliminary-injunction factors—irreparable harm, the balance of equities, and the public interest—also support Alpine.
Alpine faces irreparable harm because it faces a grave risk of being forced out of business before full SEC review, rendering any opportunity for later review at best inadequate and, at worst, moot. A business‘s “destruction in its current form” commonly qualifies as irreparable harm. Washington Metro. Area Transit Comm‘n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977); see In re NTE Conn., LLC, 26 F.4th
Here, Alpine has shown that its expulsion from FINRA will effectively amount to exclusion from the securities industry, forcing it to shutter its operations immediately. See Decl. of Maranda E. Fritz ¶ 7, ECF 46 (May 9, 2023); see also Oral Arg. Tr. 58:5-8 (FINRA‘s counsel explaining that Alpine would violate the Exchange Act if it continued to trade securities after expulsion).
Neither FINRA nor the government disputes this reality or its crushing consequences for Alpine‘s business operations. To be sure, FINRA‘s counsel at oral argument assured that Alpine could “reinstate their business in the event that the SEC ultimately reverses FINRA‘s determination.” Oral Arg. Tr. 57:18-20. That argument blinks reality. As FINRA‘s counsel conceded, full review by the SEC could take months, if not longer. Oral Arg. Tr. 57:24-25; see, e.g., Devin Lamarr Wicker, 2024 WL 2188603, at *1 (affirming bar against an individual over two years after appeal was filed). It is not realistic to expect that Alpine, choked of any income or business from securities trading, could simply reopen its doors months, if not years, after FINRA locked them shut.
The magnitude of Alpine‘s injury also tips the balance of equities in favor of Alpine. FINRA unquestionably has an interest in enforcing its own rules. See
Finally, the public interest does not weigh against granting an injunction. An injunction ensures that Alpine‘s constitutional claims can be fully litigated, without being throttled by a shutdown of its business. Also, the injunction will not leave shareholders or the public unprotected from “continued victimization” by Alpine, FINRA Br. 56. As a threshold matter, whether Alpine actually committed the violations FINRA alleges is not before us, and we express no view on that issue.
In any event, as Alpine concedes, the SEC itself remains free to bring its own enforcement action against Alpine if it considers such action necessary to protect the public and to enforce securities laws. Alpine Opening Br. 51. The public also has notice of Alpine‘s prior violations through BrokerCheck, a publicly available service that Alpine links to from its own website. See ALPINE SECURITIES, https://perma.cc/PQ3C-HQG3; BrokerCheck Report: Alpine Securities Corporation at 16, BROKERCHECK (listing required public disclosures of prior regulatory incidents), https://perma.cc/7PE8-H7JF; see also
C
For those reasons, we reverse the district court‘s denial of a preliminary injunction and instruct the district court, on remand, to enjoin FINRA during the pendency of this litigation from expelling Alpine (should such an order issue) until after the SEC has reviewed any expulsion order in FINRA‘s expedited proceeding or the time for Alpine to seek SEC review of an expulsion order has elapsed.
Our opinion today is limited in at least four ways. First, this case comes to us on a motion for a preliminary injunction. Our determination is, therefore, necessarily preliminary, as the only question is whether, on the limited record before us, Alpine has proven it is likely to succeed and to be irreparably harmed. See Winter, 555 U.S. at 20. Additional record development may or may not change Alpine‘s prospects. For example, record evidence may demonstrate that Alpine can stay in business long enough for the SEC to complete its review of FINRA‘s expedited expulsion order without injunctive relief, or that the SEC‘s stay authority functions in such a way that a stay is effectively automatic and immediately available.
Second, our opinion is limited to expulsion orders issued in expedited proceedings. In many cases, the lack of pre-enforcement government review is unlikely to violate the Constitution because review can take place after FINRA‘s sanctions take effect. That is because many types of sanctions imposed by FINRA, short of expulsion, can be undone later. Censures can be rescinded, fines can be returned, and cease-and-desist orders can be lifted. See
Expulsion from FINRA, though, is unique because federal law requiring membership in a self-regulatory organization,
Third, this opinion does not speak to either FINRA‘s own ability to delay the effectiveness of its expulsion orders in
Fourth, nothing in our opinion questions the constitutionality of enforcing an expulsion order, or any other sanction, after the SEC has affirmed it. Alpine has raised no such argument here and has not sought a preliminary injunction on that basis. So all we hold today is that it appears on this record that SEC review is not available as a practical matter in expedited expulsion proceedings prior to businesses being forced to close, and that gap likely runs afoul of the private nondelegation doctrine.
V
We turn next to Alpine‘s Appointments Clause claims. Alpine argues that FINRA‘s hearing officers are officers of the United States who must be appointed in conformance with the Appointments Clause and must be removable at will. Alpine Opening Br. 42-47. We hold that Alpine is not entitled to a preliminary injunction on these claims because it has not demonstrated that it will suffer irreparable harm from its
“A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter, 555 U.S. at 24; see Benisek v. Lamone, 585 U.S. 155, 158 (2018); Singh v. Berger, 56 F.4th 88, 95 (D.C. Cir. 2022). To that end, parties seeking a preliminary injunction, among other things, must clear a “high standard” and demonstrate that their injury is “both certain and great[.]” Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297-298 (D.C. Cir. 2006) (quotation marks omitted). That is, parties must demonstrate that their injury is sufficiently serious that there is a “clear and present need for equitable relief” on an expedited timeline and without the benefit of full factual development and hurried consideration of legal questions. Id. (quotation marks omitted).
Alpine makes two arguments for irreparable harm arising from the alleged Appointments Clause violations. First, it claims that FINRA can force it to close. Alpine Opening Br. 48. Second, it claims that it is being subjected to an unconstitutional proceeding before an unconstitutional body. Alpine Opening Br. 48. On this early record, neither of those injuries necessitates preliminary injunctive relief as to Alpine‘s Appointments Clause claims.
A
We begin with the asserted harm of forced closure as a result of expulsion from FINRA. That harm is no longer pressing given that we have already held that FINRA cannot expel Alpine until after the SEC has reviewed such a decision and made its own determination as to whether Alpine can continue to trade securities. Under the limited preliminary injunction we have ordered, the SEC will have the final word. And what the SEC will independently decide, after
Even if the SEC ultimately were to affirm an expulsion order against Alpine, the significant consequences that come with expulsion from FINRA would be imposed by the SEC, not FINRA. Alpine, notably, does not dispute that the SEC‘s members are constitutionally appointed and have the authority to expel Alpine from the securities industry consistent with the Appointments Clause. To be sure, if FINRA‘s structure were ultimately held to violate the Appointments Clause, then arguably a new hearing before a properly appointed hearing officer might be necessary even if the SEC separately signed off on any expulsion order. See Lucia, 585 U.S. at 251 (“[T]he appropriate remedy for an adjudication tainted with an appointments violation is a new hearing before a properly appointed official.“) (quotation marks omitted). But those questions are best considered after the SEC has rendered its decision in this case, not before, as Alpine raises no claim of irreparable harm from the SEC review process itself. We accordingly express no view on those questions.
1
Without the possibility of unilateral expulsion from the securities industry by FINRA, Alpine is left with its asserted injury of being forced to litigate before an allegedly unconstitutionally appointed FINRA officer. Invoking prior circuit precedent that holds that constitutional violations “constitute[] irreparable injury[,]” Alpine claims that the alleged violations of the Appointments Clause it identifies are “per se irreparable harm.” Alpine Opening Br. 48 (quoting Mills v. D.C., 571 F.3d 1304, 1312 (D.C. Cir. 2009)).
Three of our prior cases foreclose that argument.
First, in Deaver v. Seymour, 822 F.2d 66 (D.C. Cir. 1987), Deaver sought a preliminary injunction against a criminal investigation led by an independent counsel, id. at 66. Deaver claimed that the independent counsel had been unconstitutionally appointed. Id. at 68. This court held that, even assuming that the independent counsel was a “a pretender to the throne,” any Appointments Clause violation was not irreparable because it could be redressed “by a reversal of any conviction.” Id. at 70-71; see id. at 72 (Ginsburg, J., concurring) (“It is of no moment that Deaver bases his challenge upon the alleged unconstitutionality of the office of independent counsel[.]“). The court further explained that to hold otherwise would circumvent the final judgment rule. Id. at 71. And it would force us to decide “serious” issues with “far-ranging and troubling constitutional implications” through “accelerated and unorthodox review“—constitutional questions that we would have no need to decide should Deaver be acquitted. Id. Because “[w]e have an obligation to avoid constitutional questions if at all possible[,]” we affirmed the district court‘s denial of a preliminary injunction. Id.; see
Second, in In re al-Nashiri, 791 F.3d 71 (D.C. Cir. 2015), a Guantanamo Bay detainee sought mandamus relief against an ongoing military commission proceeding on the ground that the commission‘s judges were not appointed in conformance with the Appointments Clause, id. at 75. Of course, the standards for mandamus relief and preliminary injunctions differ in some respects. But what matters here is that they both require the movant to show irreparable injury. Compare National Ass‘n of Crim. Def. Lawyers, Inc. v. Department of Justice, 182 F.3d 981, 986 (D.C. Cir. 1999) (“[T]o determine whether a ‘supervisory’ writ of mandamus shall issue,” courts consider whether the party seeking the writ “will be harmed in a way not correctable on appeal[.]“), with Changji Esquel Textile 1 Co. Ltd., 40 F.4th at 721 (“A plaintiff seeking a preliminary injunction ‘must establish that * * * he is likely to suffer irreparable harm in the absence of preliminary relief[.]‘“) (quoting Winter, 555 U.S. at 20).
In that vein, In re al-Nashiri held that the detainee had not demonstrated irreparable harm because he had not identified any “immediate or ongoing harm stemming from the [military commission‘s] alleged constitutional defects.” 791 F.3d at 80. For example, the commission had not yet convicted the
Third, in John Doe Co. v. Consumer Financial Protection Bureau, 849 F.3d 1129 (D.C. Cir. 2017), a private company sought a preliminary injunction against an investigation by the Consumer Financial Protection Bureau, id. at 1131. The company claimed that (1) the Bureau was unconstitutionally structured; (2) the investigation against it violated the separation of powers; and (3) “any alleged separation-of-powers injury is by its very nature irreparable.” Id. at 1133-1135. We rejected that third argument and held that, “[i]n the absence of ‘immediate or ongoing harm stemming from the [Bureau‘s] alleged constitutional defects,’ the ‘violation of separation of powers’ by itself is not invariably an irreparable injury.” Id. at 1135 (second alteration in original) (quoting In re al-Nashiri, 791 F.3d at 79-80).
Taken together, those three cases squarely hold that being investigated by, or participating in a proceeding before, an unconstitutionally appointed officer is not, without more, an injury that necessitates preliminary injunctive relief. And Alpine has not asserted anything more. See Leachco, Inc. v. Consumer Prod. Safety Comm‘n, 103 F.4th 748, 754 (10th Cir. 2024) (“[A] separation of powers violation, alone, [does] not constitute irreparable harm[.]“).
As a panel, we are bound by our precedent unless “intervening Supreme Court precedent * * * clearly dictate[s] a departure[.]” Bahlul v. United States, 77 F.4th 918, 926 (D.C. Cir. 2023) (quoting Old Dominion Elec. Coop. v. FERC, 892 F.3d 1223, 1232 n.2 (D.C. Cir. 2018)); see also LaShawn A. v. Barry, 87 F.3d 1389, 1393 (D.C. Cir. 1996) (en banc). To do so, intervening Supreme Court authority must “effectively overrule, i.e., eviscerate, the law of our circuit.” Bahlul, 77 F.4th at 925 (formatting modified).
Alpine, however, makes no argument at all that our precedent has been effectively overruled or that there is any other basis on which this panel could depart from it. In fact, Alpine ignores all three of those cases.
2
The dissenting opinion makes arguments on Alpine‘s behalf that it has forfeited. But to no avail. For example, the dissenting opinion claims that our decision in Deaver depended critically on “the Federal Rules of Criminal Procedure, criminal-law precedents, equity‘s interaction with criminal proceedings, and the collateral-order exception to the final-judgment rule[,]” none of which this case involves. Dissenting Op. at 25. To be sure, the court in Deaver mentioned those factors. 822 F.2d at 70-71. But its ultimate ruling did not depend on them. Instead, the ruling—like Chief Justice Rehnquist‘s own decision—hinged on the availability of full relief on later review. Id. at 71; see Deaver, 483 U.S. at 1303 (Rehnquist, C.J., in chambers) (“There will be time enough for applicant to present his constitutional claim to the appellate courts if and when he is convicted of the charges against him.“). That has to be right. Court-made rules and precedent necessarily would have to take a back seat if just going forward with the case inflicted a constitutional injury.
The dissenting opinion equally errs in arguing that In re al-Nashiri confined its holding to the context of military commissions. See Dissenting Op. at 25-26. Considerations about insulating the military from legislative or judicial
Finally, the dissenting opinion‘s effort to unravel the precedential status of John Doe fails. This court has treated that published decision as binding precedent for seven years. See, e.g., Archdiocese of Wash. v. Washington Metro. Area Transit Auth., 877 F.3d 1066, 1066 (D.C. Cir. 2017); CFPB v. Accrediting Council for Indep. Colls. & Schs., 854 F.3d 683, 688 (D.C. Cir. 2017). A later panel is not free to sweep away that history. Especially based on an argument that no party has advanced.
C
Turning to the arguments that Alpine raises to support its preliminary injunction motion, Alpine anchors its irreparable harm argument in Axon Enterprises v. Federal Trade Commission, 598 U.S. 175 (2023), arguing that it automatically mandates a finding of irreparable harm here. That is incorrect.
In Axon, the question before the Supreme Court was whether parties to an ongoing proceeding before a governmental agency had to first go through the agency‘s administrative process before suing in federal court to challenge the administrative proceeding‘s structural constitutionality. 598 U.S. at 180. The Supreme Court concluded that they do not because, in enacting the relevant statutory review schemes,
Seizing on that language, Alpine claims that Axon held that being forced to participate in an unconstitutional agency proceeding necessarily qualifies as irreparable harm supporting the issuance of a preliminary injunction. That overreads Axon in two respects.
First, Axon answered a statutory jurisdictional question about whether Congress intended to “oust[] district courts of jurisdiction” they would ordinarily have by requiring that parties instead litigate their claims through agency proceedings. Axon, 598 U.S. at 185-186. The Court‘s answer to Axon‘s question turned in significant part on the common-sense intuition that a structural constitutional question was both “wholly collateral to” the questions at issue in agency proceedings and lies “outside the agency‘s expertise.” Id. at 186.
In finding Axon‘s claims within the district court‘s ordinary jurisdiction, the Court did not speak to what constitutes irreparable harm for purposes of the extraordinary remedy of a preliminary injunction. True, the Court also reasoned that the injury it identified could not be remedied if a party were forced to litigate before the agency prior to raising its claims in federal court. Axon, 598 U.S. at 192. But here, there is no barrier to Alpine litigating its constitutional claims directly in federal court. That is exactly what it has done. Instead, the question before us, which was not answered in Axon, is whether the injury Alpine claims is so great that it necessitates “accelerated and unorthodox” summary review of the merits without a developed factual record. Deaver, 822
Put another way, Axon at most says that, as a matter of statutory jurisdiction, a federal-court challenge to an unconstitutional appointment can begin before the agency acts. It does not say that every agency proceeding already underway must immediately be halted because of an asserted constitutional flaw. So while Alpine‘s interpretation of Axon is “arguable,” Axon does not “clearly dictate a departure from circuit law.” Bahlul, 77 F.4th at 926 (quotation marks omitted). Importantly, Alpine does not argue otherwise.
Second, as Alpine‘s private nondelegation argument suggests, FINRA is not a government agency like those at issue in Axon. FINRA is a Delaware nonprofit corporation, and its personnel are private employees, not government employees. Regardless of whether FINRA is ultimately found to be wearing a government hat when it expels members, it is also formally a private, self-regulatory membership organization. Nothing in Axon addressed an asserted injury from a member of a private organization having to go through a hearing process before such an entity. Whether or not Alpine has a meritorious Appointments Clause objection to the FINRA process in its current form, Axon does not speak to the nature of any such injury clearly enough to “dictate a departure” by this panel from prior circuit precedent. Bahlul, 77 F.4th at 926 (quotation
In sum, we hold that Alpine has not demonstrated irreparable harm stemming from the alleged violations of the Appointments Clause other than the harm from expulsion that is already redressed by the nondelegation preliminary injunction. Because “[a] movant‘s failure to show any irreparable harm is * * * grounds for refusing to issue a preliminary injunction,” we hold that Alpine is not entitled to a preliminary injunction based on its asserted Appointments Clause violations. Chaplaincy, 454 F.3d at 297; see Winter, 555 U.S. at 22 (Issuing a preliminary injunction without “demonstrat[ing] that irreparable injury is likely * * * is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.“). We accordingly express no view on the remaining preliminary injunction factors, including whether Alpine has demonstrated a likelihood of success on the merits of the applicability of the Appointments Clause to FINRA‘s employees. All we hold is that Alpine has not shown, on this record, that any such violation would present irreparable harm to Alpine that necessitates the exceptional remedy of a preliminary injunction against the proceeding itself.
VI
“‘Long settled and established practice may have great weight’ in interpreting constitutional provisions about the operation of government.” CFPB v. Community Fin. Servs. Ass‘n of America, 601 U.S. 416, 442 (2024) (Kagan, J., concurring) (quoting Chiafalo v. Washington, 591 U.S. 578, 592-593 (2020)). Self-regulation in the securities industry has existed for centuries, and Congress has repeatedly reaffirmed
Alpine has met its burden of demonstrating a likelihood that the private nondelegation doctrine requires that SEC review be available before Alpine can be expelled from FINRA because, under federal law, that decision would effectively ban Alpine from the securities trading industry. Alpine has also shown that it faces irreparable harm if expelled from the securities industry in that it will have to shut down its business immediately. For those reasons, the district court erred in denying Alpine a preliminary injunction protecting it against being expelled from FINRA (should FINRA issue such an order) until either the SEC affirms FINRA‘s decision or the time for Alpine to seek SEC review has elapsed.
As to Alpine‘s Appointments Clause claims, Alpine has not demonstrated that it faces irreparable harm stemming from participating in FINRA‘s hearing process enforcing FINRA‘s membership rules, since FINRA‘s decision can no longer pose the threat of wholesale exclusion from securities trading. For that reason, Alpine is not entitled to a preliminary injunction against FINRA‘s expedited proceeding itself, and FINRA may resume the expedited proceeding against Alpine.
Finally, we underscore that nothing in this opinion resolves Alpine‘s claims on the merits. We leave that for the district court to decide on remand.
For the foregoing reasons, we reverse the district court insofar as it held that FINRA could singlehandedly expel Alpine and thereby exclude it from the securities trading industry, and remand for the court to enter a limited preliminary injunction enjoining FINRA from giving effect to
So ordered.
The Financial Industry Regulatory Authority is a nominally private corporation. It investigates, prosecutes, and adjudicates violations of federal securities laws. Those laws generally forbid broker-dealers from doing business unless they belong to FINRA.
Today, the majority holds that the Constitution likely requires government review before FINRA may expel a company from its ranks and thereby put that company out of business. That holding is a victory for the Constitution.
But it is only a partial victory because the problems with FINRA’s enforcement proceedings run even deeper. FINRA wields significant executive authority when it investigates, prosecutes, and initially adjudicates allegations against a company required by law to put itself at FINRA’s mercy. That type of executive power can be exercised only by the President (accountable to the nation) and his executive officers (accountable to him).
By flouting that principle through an “illegitimate proceeding, led by an illegitimate decisionmaker,”1 FINRA imposes an irreparable injury that this court should prevent by granting the requested preliminary injunction in its entirety.
I
In response to the 1929 stock market crash and the onset of the Great Depression, Congress enacted a series of laws to regulate securities trading.2 The
A few years later, the
The
For several decades, membership in securities associations was voluntary.6 But in 1983, Congress changed course and made membership mandatory for nearly all brokers and dealers.7 And today, the only securities association recognized by the SEC is FINRA.8 That means, in effect, membership in FINRA is mandatory for anyone who wants to run a brokerage.
Though FINRA describes itself as “a private corporation that the government did not create and does not control,” it functions in ways similar to a government agency.13 Federal
In particular, FINRA is responsible for “enforc[ing] compliance” with the
The Department of Enforcement conducts invasive investigations. It can require brokers to “provide information
After that, FINRA may initiate a formal enforcement proceeding to fine members or expel them from FINRA.20 Because FINRA membership is mandatory, expulsion from FINRA is, in effect, expulsion from the securities industry. From a broker’s perspective, it’s the “corporate death penalty.”
These enforcement proceedings come in two forms. In the ordinary proceeding, a member may appeal an unfavorable ruling first to an internal appellate tribunal and then to the SEC.21 But in an expedited proceeding, sometimes overseen by only one hearing officer, internal review of the decision is discretionary, and the hearing officer’s decision to expel a member takes effect immediately, before the member can appeal to the SEC.22
This panoply of enforcement powers requires no contemporaneous oversight by the SEC. The SEC does not control FINRA’s investigations, its prosecutions, or its initial adjudications. Until the SEC accepts an appeal from a final FINRA decision, FINRA wields its enforcement powers unilaterally.
While contesting that decision before FINRA’s appellate tribunal, Alpine challenged FINRA’s constitutionality in federal court. During that litigation, FINRA launched an expedited proceeding to immediately expel Alpine for allegedly violating the cease-and-desist order. Though Alpine could ask the SEC to review any final expulsion order, an emergency expulsion order is not automatically stayed during the SEC’s review.23
So Alpine moved to preliminarily enjoin that emergency proceeding until the final resolution of its claims. When the district court denied that motion, Alpine appealed. A panel of this court determined that Alpine’s arguments merited an injunction pending appeal.24
II
We consider four factors when deciding whether Alpine should receive a preliminary injunction: Is Alpine likely to succeed on its claims? Will it likely suffer an irreparable injury
III
The merits of this case turn on two bedrock principles. First, the government must not delegate significant executive authority to private actors. Second, public officers must not exercise significant executive authority unless they are removable by the President and properly appointed.28
Alpine has made a strong showing that FINRA, whether private or public, violates one of these principles.
It “would be impossible for one man to perform” all enforcement actions himself.34 So the Constitution “assumes” that the President will appoint “lesser executive officers” to assist in “discharging the duties of his trust.”35 Depending on the circumstances, these officers can investigate citizens, search their homes, arrest them, question them, issue regulatory orders, and carry out judicially approved penalties ranging from fines to imprisonment.36
Because these constitutional safeguards have been thought to apply only to the government, not private actors,39 “core
Even worse than an interbranch delegation is an extrabranch delegation — the “most obnoxious form” of delegation.42 If the vast powers of the federal government could be exercised outside the constitutional system, the government would be “able to evade the most solemn obligations imposed in the Constitution by simply resorting to the corporate form.”43
B
FINRA is likely a private entity exercising significant executive authority. If so, FINRA subverts the constitutional design.
FINRA is a Delaware corporation, but it wields the significant executive authority that the Constitution vests in the Executive Branch alone.
Start by considering some of the actions FINRA may take, all without government oversight:
- Open an investigation;47
- Demand to inspect books, records, or accounts;48
- Require a brokerage employee to provide information orally, in writing, or electronically;49
- Require an employee to testify under oath;50
- Exercise prosecutorial discretion to choose formal disciplinary action instead of informal disciplinary action or to choose no action at all;51
Authorize complaints against member broker-dealers;52 - Demand submission of trading data;53
- Negotiate settlements;54
- Require members to participate in live adjudicatory proceedings before an in-house tribunal;55
- Release, at its discretion, information related to disciplinary proceedings;56
- Impose the costs of the disciplinary proceeding on the disciplined member as FINRA “deems fair and appropriate”;57
- Issue large fines;58 and
- Expel a firm from FINRA and (in effect) from the securities industry, for violation of federal securities
Put simply, for brokers required (by statute) to join a securities association, FINRA operates as the “principal decisionmaker in the use of federal power.”60 That’s because it enforces federal law and rules that carry the force of law.61 And it does so without any initial approval from its supposed supervisor, the SEC. This “especially provocative exercise of governmental power by a private organization” transgresses the private nondelegation doctrine.62
FINRA attempts to avoid this conclusion by suggesting that any private nondelegation problem posed by FINRA’s enforcement powers are solved by SEC review because, at the very end of the process, the SEC can reverse a sanction that FINRA imposes. But reversal of the sanction does not negate the vast array of powers that FINRA exercises before the matter even reaches the SEC.
Moreover, FINRA’s insistence that SEC review cures its constitutional defect is impossible to reconcile with Lucia v. SEC. The Supreme Court held in Lucia that the SEC’s administrative law judges are “Officers of the United States” who must be properly appointed and removable, regardless of the SEC’s ability to review their decisions.63 There is no reason to think that nearly identical hearing officers who are private, rather than governmental, can enjoy the same degree of authority without (at least) the same restrictions. That would mean that the Constitution requires less accountability when significant executive authority is delegated outside the executive branch than when such authority is delegated within it.
Even putting Lucia aside, consider FINRA’s power to initiate an enforcement action that may expel a company from the securities industry with the force of law. The problem? That’s the power to decide “whether to take enforcement actions against violators of federal law,”64 and it is among “the greatest unilateral powers a President possesses under the
Also consider FINRA’s power to settle an enforcement action. Suppose, for example, that FINRA has been investigating a company for about six years.68 Of course, the investigation and enforcement proceedings have cost the company significant time and resources. But finally, after six years, FINRA and the company negotiate a deal: The company can stay in business — for the price of a fine and a waiver of its right to SEC review.
That settlement would “constitute final disciplinary action of FINRA.”69 But look at what’s missing. At no time was the
That illustrates a constitutionally significant difference between rulemaking and enforcement. Rulemaking can sometimes be properly supervised by final-stage review if the review occurs before the rule takes effect.72 In contrast, enforcement actions cannot be properly supervised by final-stage review because severe restrictions on liberty can occur at every step.73 So, for an enforcement action, the issue of when oversight occurs is just as important as how much oversight occurs.
C
It is no solution to say FINRA is a “part of the Government.”74 Classifying FINRA as a public agency might
To start, FINRA probably is not part of the government. It was not created by the government. It is not controlled by the government. It is not funded by the government. All these facts point in the same direction: FINRA is a private entity.75
But even if we assume FINRA is a governmental entity,
The upshot is this: If FINRA is part of the government, then hearing officers are “Officers of the United States,”81 and that means they must be appointed directly by the President, courts of law, or heads of departments — like the officials in Lucia and Freytag.82 In addition, they can‘t be insulated from presidential removal by more than one level of for-cause removal restrictions.83
* * *
In short, Congress requires FINRA to “enforce” both its own rules and federal securities law, without adequate control
IV
Alpine has also shown that the denial of a preliminary injunction will likely cause irreparable harm.
Irreparable harm has two components. The asserted injury must be certain and imminent.89 And it must be something that can‘t later be fixed by “adequate compensat[ion] or other corrective relief.”90
The Supreme Court‘s recent decision in Axon Enterprise, Inc. v. FTC tells us that Alpine faces certain and imminent harm that cannot later be fixed.91 There, as here, the regulated party challenged the constitutionality of an enforcement action because the decisionmakers were “insufficiently accountable to the President.”92 There, as here, the regulated party objected to the “harm” of “being subjected” to an “unconstitutional . . .
To be sure, Axon was answering a question about whether a district court had jurisdiction, not whether a court should grant a preliminary injunction.95 But I struggle to see how an injury that is completely “impossible to remedy” (the standard there) meaningfully differs from an injury that is “beyond remediation” (the standard here).96 When likely to succeed in a challenge to enforcement proceedings based on the Appointments Clause or the President‘s removal power, a party has the “right[] not to undergo the complained-of agency proceedings,” which according to Axon are “impossible to remedy once the proceeding is over.”97 Nothing about Axon‘s reasoning limits that fundamental legal principle to a defendant‘s motion to dismiss for lack of jurisdiction or excludes it from applying to a plaintiff‘s motion for a preliminary injunction.
None of this means that “every agency proceeding already underway must immediately be halted because of an asserted
The majority cites a handful of our circuit‘s cases for the proposition that a separation-of-powers violation alone is not enough for irreparable harm: Deaver v. Seymour; In re al-Nashiri; and John Doe v. CFPB.100 But none of these cases supplies a rule that controls this case.101
First — in Deaver v. Seymour, former presidential aide Michael Deaver asked the court to enjoin an independent counsel from indicting him. He argued that the independent counsel‘s appointment was unconstitutional.102 This court declined to enjoin the indictment.103 It reasoned in part that Deaver could “move to dismiss the charges under
Absent Axon, perhaps Deaver would provide some guidance. But Axon stands for the very proposition that the majority says Deaver rejects. And if forced to choose between the two, I‘ll take Axon — a Supreme Court case from last year that involved a civil enforcement proceeding like today‘s case — over a circuit case from 37 years ago that involved a criminal prosecution unlike today‘s case.
Second — in al-Nashiri, a detainee at Guantanamo Bay sought mandamus relief from a military commission proceeding.106 Even at first blush, the differences in the cases are apparent. Mandamus relief and preliminary injunctions have different standards because they serve distinct functions.107 And the military‘s critical role requires insulation
Third — in John Doe, a party regulated by the Consumer Financial Protection Bureau sought a preliminary injunction to halt a CFPB investigation.109 Over a dissent from then-Judge Kavanaugh, an emergency panel denied the requested relief in a non-precedential order.110 It stated that a separation-of-powers violation is “not invariably an irreparable injury.”111
If John Doe had been issued as a published opinion, or if the panel had later designated it for publication, stare decisis would require us to abide by its holding. But John Doe is an unpublished order.112 That means it is “not suitable for
Reliance on the (non-binding) order in John Doe is all the more curious considering that the John Doe dissent reads like a preview of Axon. Just as Axon held that it “impossible to remedy” the harm of “being subjected” to an “unconstitutional . . . proceeding by an unaccountable” decisionmaker “once the proceeding is over,”114 the dissent in John Doe argued: “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 has issued binding rules governing the plaintiff‘s conduct and that has authority to bring enforcement actions against the plaintiff.”115
The two remaining preliminary injunction factors also favor Alpine. “The public interest is not served by letting an unconstitutional[]” entity “continue to operate” and persist in violating a business‘s rights.116 And the demonstrated violation of Alpine‘s constitutional rights tips the balance of equities in its favor, even if FINRA‘s enforcement goals will be impeded until the close of the collateral litigation.117 Alpine has therefore shown both that the issuance of its requested injunction is “in the public interest” and that the “balance of equities tips” in its favor.118
* * *
FINRA relies on a Goldilocks defense. It is too much like a private entity for Article II‘s strictures, yet too much like the government for the private nondelegation doctrine to apply.119 But FINRA “cannot have its cake and eat it too.”120 Its split
The district court erred when it held otherwise. Because the majority correctly enjoins FINRA from unilaterally expelling Alpine and destroying its business, I concur in that part of its judgment. But I respectfully dissent from the majority‘s decision not to enjoin the expedited enforcement proceeding in its entirety.
Notes
FINRA will also sometimes bar individuals from associating with a FINRA member. See
We also note that membership in a registered securities association like FINRA is not mandatory for securities traders that only trade on one exchange.