Securities and Exchange Commission v. Cochran

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Supreme Court of the United States
Securities and Exchange Commission v. Cochran
Term: 2022
Important Dates
Argued: November 7, 2022
Decided: April 14, 2023
Outcome
Consolidated with Axon Enterprise, Inc. v. Federal Trade Commission

Securities and Exchange Commission (SEC) v. Cochran is a case that questions whether federal district courts can concurrently hear constitutional challenges to the SEC’s administrative law judges (ALJs) in cases where the agency has yet to issue a final adjudicative order. The case was argued before the Supreme Court of the United States on November 7, 2022, during the court's October 2022-2023 term and consolidated with Axon Enterprise, Inc. v. Federal Trade Commission on April 14, 2023.

HIGHLIGHTS
  • The case: In 2016, the SEC filed administrative proceedings against Michelle Cochran, a certified public accountant. An administrative law judge (ALJ) found Cochran had violated the Exchange Act. During that time, the U.S. Supreme Court ruled in Lucia v. SEC that ALJs are subject to the Appointments Clause. After Lucia, the SEC scheduled Cochran's case for rehearing before an ALJ appointed under the standards Lucia established. Cochran filed a lawsuit in U.S. district court, asking the court to enjoin the second hearing. The district court dismissed Cochran's suit for lack of subject-matter jurisdiction. On appeal, the Fifth Circuit held the district court had jurisdiction to hear Cochran's case. Click here to learn more about the case's background.
  • The issue: The case concerned the subject-matter jurisdiction of U.S. district courts.
  • The questions presented: Whether U.S. district courts have the power to consider cases challenging the constitutionality of the SEC's administrative law judges when the SEC has yet to issue a final adjudicative order.[1]


    • The case came on a writ of certiorari to the United States Court of Appeals for the Fifth Circuit. To review the lower court's opinion, click here.

    The case was consolidated with Axon Enterprise, Inc. v. Federal Trade Commission on April 14, 2023.[2]

    Timeline

    The following timeline details key events in this case:

    • April 14, 2023: The U.S. Supreme Court issued a decision in Axon Enterprise, Inc. v. Federal Trade Commission, consolidated with Securities and Exchange Commission v. Cochran.
    • November 7, 2022: The U.S. Supreme Court heard oral argument.
    • May 16, 2022: The U.S. Supreme Court agreed to hear the case.
    • March 11, 2022: The Securities and Exchange Commission, the petitioner, appealed to the U.S. Supreme Court.
    • December 13, 2021: Sitting en banc, the U.S. Court of Appeals for the Fifth Circuit affirmed in part and reversed in part the lower court's decision. The Fifth Circuit also remanded the case.

    Background

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    In 2016, the Securities and Exchange Commission (SEC) began administrative proceedings against Michelle Cochran, a certified public accountant, for violating the Exchange Act. An administrative law judge (ALJ) ruled that Cochran had violated the act. The ALJ imposed a $22,500 fine and prohibited Cochran from practicing before the SEC for five years. In 2018, the U.S. Supreme Court ruled in Lucia v. SEC that ALJs are subject to the Appointments Clause. After Lucia, the SEC remanded Cochran's case for a hearing before an ALJ appointed under the standards Lucia established.[3]

    Cochran then sued the SEC in U.S. district court, arguing that the removal protections of the SEC ALJ assigned to her case unconstitutionally insulated the ALJ from removal by the president. She asked the court to enjoin, or prevent, the second administrative hearing. The district court dismissed Cochran's suit for lack of subject-matter jurisdiction, holding that the Securities Exchange Act of 1934 required Cochran to first raise her constitutional challenge during agency proceedings before appealing the final agency order to the federal courts. Cochran appealed to the circuit court. A panel of the Fifth Circuit agreed with the district court. The full Fifth Circuit heard the case and disagreed, finding in part that Cochran’s constitutional concern “has absolutely nothing whatsoever to do with a final order, and therefore her claim falls outside of” the statutory limit on the district court’s subject matter jurisdiction.[3][4]

    “In Free Enterprise Fund, the Supreme Court rejected the precise argument the SEC makes here—that the Exchange Act divests district courts of jurisdiction over removal power challenges,” wrote Judge Catharina Haynes in the opinion.[4]

    Judge Gregg Costa argued in the dissent, “Before today, every court of appeals to consider the question has answered that a person facing an SEC enforcement action may not mount a collateral attack against the agency proceeding in federal district court.” The majority, he further argued, “turns constitutional avoidance on its head by making separation-of-powers claims a first rather than last resort in resolving cases.”[4]

    Questions presented

    The petitioner presented the following question to the court:

    Questions presented:
    “ Whether a federal district court has jurisdiction to hear a suit in which the respondent in an ongoing Securities and Exchange Commission administrative proceeding seeks to enjoin that proceeding, based on an alleged constitutional defect in the statutory provisions that govern the removal of the administrative law judge who will conduct the proceeding.[5] ”

    Oral argument

    The U.S. Supreme Court heard oral argument on November 7, 2022.

    Audio

    Audio of oral argument:[6]




    Transcript

    Transcript of oral argument:[7]

    Outcome

    The case was consolidated with Axon Enterprise, Inc. v. Federal Trade Commission. Click here to read more about the decision issued in the case.

    October term 2022-2023

    See also: Supreme Court cases, October term 2022-2023

    The Supreme Court began hearing cases for the term on October 3, 2022. The court's yearly term begins on the first Monday in October and lasts until the first Monday in October the following year. The court generally releases the majority of its decisions in mid-June.[8]


    See also

    External links

    Footnotes

    1. ↑ SCOTUSblog, "Justices grant review in two cases that test jurisdiction of district courts," May 16, 2022
    2. ↑ SCOTUSblog, "Securities and Exchange Commission v. Cochran," accessed May 16, 2023
    3. ↑ 3.0 3.1 Supreme Court of the United States, Securities and Exchange Commission v. Cochran, "Petition for a writ of certiorari," March 11, 2022
    4. ↑ 4.0 4.1 4.2 United States Court of Appeals for the Fifth Circuit, "Cochran v. SEC," December 13, 2021
    5. ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    6. ↑ Supreme Court of the United States, "Oral Argument - Audio," argued November 7, 2022
    7. ↑ Supreme Court of the United States, "Oral Argument - Transcript," argued November 7, 2022
    8. ↑ SupremeCourt.gov, "The Supreme Court at Work: The Term and Caseload," accessed January 24, 2022
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