“pure” questions of law. Either the authorization of the enforcement action by Commissioner
Hunt was sanctioned by the SEC regulations or it was not. Similarly, the ratification of the
enforcement action by the full SEC was either legally proper or it was not. We are confident the
Court of Appeals will be able to analyze these legal issues without needing to study the
developed record in this case.

Il. Are the issues controlling?

Federal courts are courts of limited jurisdiction. See Hay v. Indiana State Bd. of Tax
Comm 'rs., 312 F.3d 876, 878 (7th Cir. 2002), They may exercise jurisdiction only over matters
authorized by the Constitution and by statute. See Turner/Ozanne v. Hyman/Power, 111 F.3d
1312, 1316 (7th Cir. 1997). If the procedural requirements of a statute under which a party seeks
to invoke a federal court’s jurisdiction are not satisfied, then the court logically does not have
subject matter jurisdiction to consider the case.

In this case, we ruled that the SEC did comport with the procedural dictates of the duty
officer rule as well as the Securities and Exchange Act when it filed the enforcement action
against the defendants. In other words, we concluded that we had subject matter jurisdiction over
this case. However, as the defendants have made clear, they respectfully contend that this
threshold finding was in error. They may be right. If the Seventh Circuit decides to accept this
interlocutory appeal and concludes that our jurisdictional ruling was incorrect, then this case will
be dismissed, Therefore, we find that the issues presented for interlocutory appeal are controlling
questions of law.

I. Is there substantial grounds for a difference of opinion?

The third Section 1292(b) factor requires an analysis of whether the issues presented for


CONCLUSION

For the foregoing reasons, the defendants’ motion for certification pursuant to 28 U.S.C.
§ 1292(b) is hereby granted. The following two questions meet the requirements of Section
1292(b): 1) If the SEC invokes this Court’s jurisdiction under the duty officer rule, may the Court
assume that the duty officer formed an opinion regarding urgency at the time the action was
authorized as required under Rule 43(b)(1), 17 C.F.R. § 200.43(b)(1)?; and 2) Does Rule 43(c),
17 C.F.R. § 200.43(c), allow the SEC to cure an action of the duty officer which was taken in
violation of Rule 43(b)(1) in the first instance? Instruction by the Seventh Circuit on these issues
would be invaluable to regulators, lawmakers, courts, and litigants alike, especially in an era
during which confirmation of presidential appointees is less than swift and certain. Therefore,
this Court’s order of November 21, 2002 is certified to the Seventh Circuit Court of Appeals for
interlocutory review.

It is so ordered.

bd, Ch

Wayne R. Andersen
United States District Judge

Dated: Cpesaesus 24,2068


instructed district courts not to certify interlocutory orders under Section 1292(b) “{uJnless all
these criteria are satisfied ....” Jd. at 676. Because interlocutory appeals “tend to cause
unnecessary delays in the lower court’s proceedings and tend to waste overburdened judicial
resources,” ““permission to take [such] an. . . appeal should be granted sparingly and with
discrimination.” Lakeside Feeders, Ltd. v. Chicago Meat Processors, Inc., 35 F. Supp. 2d 638,
643 (N.D. Ill. 1999) (citing Herdrich v. Pegram, 154 F.3d 362, 368 (7th Cir. 1998)); Coopers &
Lybrand y. Livesay, 437 U.S. 463, 473-74, 98 S.Ct. 2454 (1978).

I Are there questions of law?

The first statutory requirement for an interlocutory appeal pursuant to Section 1292(b) is
that there must be a question of law. In Ahrenholz, the Seventh Circuit stated that a “question of
law” for purposes of Section 1292(b) “has reference to a question of the meaning of a statutory or
constitutional provision, regulation, or common law doctrine. .. .” 219 F.3d at 676, The court
then stated that interlocutory appeals should be reserved for ““‘pure’ qeustion{s] of law rather than
merely to an issue that might be free from a factual contest.” Jd. at 677. “To summarize its
holding on this point, the court stated that a ‘question of law means an abstract legal issue... .””
Gierum v. Kontrick, 2002 WL 226857, at *3 (N.D. Ill. Feb. 14, 2002) (quoting Ahrenholz, 219
F.3d. at 677). .

There is little doubt that the issues presented in the motion to dismiss with respect to the
SEC’s invocation of the “duty officer rule” (Rule 43) are questions of law. Unlike in Ahrenholz,
where the district court certified the question of whether it was correct in denying summary
judgment for the defendant, our conclusions regarding the SEC’s urgency determination as well

as our finding that the ratification of the enforcement action by the full SEC was proper are


certification are contestable, or, in other words, that substantial grounds for a difference of
opinion on the issues exist. In this case, there is no doubt that this factor is satisfied. There is a
dearth of caselaw addressing both the legality of regulatory actions initiated by fewer than a
majority of commissioners and the efficacy of subsequent ratification by a fully constituted
regulatory entity. This alone should be sufficient to demonstrate that there could be a difference.
of opinion on the issues we addressed in our order. However, the recent interplay between the
SEC and its administrative law judge regarding Rule 43(b)(1) truly carries the day on this factor.

In In re Ernst & Young, LLP, SEC Release No. 600 (July 2, 2002), the SEC’s Chief
Administrative Law Judge dismissed an administrative action against Emst & Young because the
SEC failed to make the necessary showing under Rule 43(b)(1) that the duty officers acted
because of “urgency.” The judge held that, because there was no showing of urgency,
Commissioner Hunt was not authorized to approve the filing of the enforcement action pursuant
to the duty officer rule, and she dismissed the lawsuit. A few months later, the SEC unilaterally
vacated the Ernst & Young decision on procedural grounds, but we suspect the SEC was not
pleased with the limitations the administrative law judge’s decision imposed on the
Commission’s ability to authorize enforcement actions through the duty officer rule. Thus, the
fact that there is a difference in opinion between the SEC and its own administrative law judge
on the workings of Rule 43(6)(1) establishes that the issues addressed in our order are'contestable
and subject to differences of opinion.
IV. Will an interlocutory appeal materially advance the litigation?

Pursuant to Section 1292(b), this Court should only certify an interlocutory appeal if the

controlling legal issues “may materially advance the ultimate termination of the litigation.” 28


os

Minute Order Form (06/97)

United States District Court, Northern District of Illinois

aende Maghnrae Jade Wayne R. Andersen “than aaigned Judge

CASE NUMBER 2C€ 2180 DATE | January aq, 2003
CASE S.E.C. vs. Dean L. Buntrock et al
TITLE

[ln the following box (a) indicate the party filing the mation, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.]

MOTION:

DOCKET ENTRY:

qd) Qa Filed motion of [ use listing in “Motion” box above.]

(2) QO Brief in support of motion due

(3) 0 Answer brief to motion due. . Reply to answer briefdue_—

(4) oO Ruling/Hearingon___setfor___at

(5) im) Status hearing[held/continued to] [set for/re-set for}on____setfor__—_—_at

(6) Oo Pretrial conference[held/continued to} [set for/re-set for]on___setfor___—ssat_— ts

(7) oO Trial[set for/re-set for]on__—_aat

(8) Oo [Bench/Jury trial) [Hearing] held/continued to saat

(9) Oo This case is dismissed [with/without prejudice and without costs[by/agreement/pursuant to)

OFRCP4(m) OLocal Rule 41.1 CO FRCP41(a\(1) 0) FRCP41(a)(2).

ao «of [Other docket entry] Enter MEMORANDUM, OPINION AND ORDER: The motion for
certification is [71-1] granted. This Court’s order of 11/21/2002 is certified to the Seventh Circuit
Court of Appeals for interlocutory review.

dl) @ [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required. umber of notices

Notices mailed by judge's staff. ;
Notified counsel by telephone. FEB 32003
Docketing to mail notices.
Mail AO 450 form. 4unog Louteig ‘Sn

Copy to judge/magistrate judge.

HO 87 Oy po ane
courtroom fed Te nye ey date sled rice
TSA deputy’s ae
inies OTUs" Bate/titnd received in 7
< central Clerk's Office mailing deputy nts

|



US.C. § 1292(b). If the Seventh Circuit reverses our decision regarding subject matter
jurisdiction, then the case will have to be dismissed. Accordingly, it makes much more sense for
these issues to be addressed by the Seventh Circuit now, as opposed to at the conclusion of the
lawsuit. It would be a substantial waste of not only this Court’s judicial resources but also the
personal funds of the defendants if this case were to proceed forward and then ultimately be
reversed because the Seventh Circuit determined we did not possess subject matter jurisdiction

over the lawsuit in the first place.


IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS DOCKETED
EASTERN DIVISION
FEB 38 2003

SECURITIES AND EXCHANGE )
COMMISSION, )
)
Plaintiff, )

) No. 02. C2180
v. )

) Wayne R. Andersen

DEAN L. BUNTROCK, PHILLIPB. ) District Judge
ROONEY, JAMES E. KOENIG, )
THOMAS C. BAU, HERBERT A. )
GETZ, and BRUCE D. TOBECKSEN, _)
)
Defendants. )

M M OPINION AND ORDER

This case is before the Court on the motion of the defendants for certification pursuant to
28 U.S.C. § 1292(b). In the motion, the defendants have asked this Court to do something it has
never agreed to do - certify an interlocutory appeal. For the following reasons, the motion for
certification is granted.

BACKGROUND

The defendants in this case have been investigated and sued by the United States
Securities and Exchange Commission (“SEC”), a process which is expensive and debilitating to
them in many respects. It is uncontested that this action was originally brought in the name of
the SEC without a concurrence of a majority of the SEC Commissioners and that the subsequent

ratification of this action by a majority of SEC Commissioners came well after the statute of

“|4

limitations had run on the substantive federal securities law claims. The circumstances


surrounding the initiation of the SEC’s enforcement action prompted the defendants to move to
dismiss the complaint for lack of subject matter jurisdiction. This Court denied that motion on
November 21, 2002.

On December 13, 2002, the defendants filed the instant motion requesting that we certify
to the United States Court of Appeals for the Seventh Circuit an interlocutory appeal of the issues
raised in their motion to dismiss. Specifically, they seek an order certifying the following two
questions: 1) If the SEC invokes this Court’s jurisdiction under the duty officer rule, may the
Court assume that the duty officer formed an opinion regarding urgency at the time the action
was authorized as required under Rule 43(b)(1), 17 C.F.R. § 200.43(b)(1)?; and 2) Does Rule
43(c), 17 C.F.R. § 200.43(c), allow the SEC to cure an action of the duty officer which was taken
in violation of Rule 43(b)(1) in the first instance? Both parties submitted briefs on the motion
and the issue is now ripe for decision.

DISCUSSION

The denial of a motion to dismiss for lack of subject matter jurisdiction is not a “final
decision” from which an immediate appeal is available under 28 U.S.C. § 1291. Cherry v.
University of Wisc. Sys. Bd. of Regents, 265 F.3d 541, 546 (7th Cir. 2001). However, 28 U.S.C.
§ 1292(b) provides for interlocutory appeals of certain otherwise non-appealable orders. Pursuant
to this provision, a litigant may not file a petition for permission to appeal with the circuit court
until the district court judge has certified that, in his or her opinion, the order at issue satisfies the
following four statutory criteria: “there must be a question of /aw, it must be controlling, it must
be contestable, and its resolution must promise to speed up the litigation.” Ahrenholz v. Board of

Trustees of the Univ. of Ill., 219 F.3d 674, 675 (7th Cir. 2000). The Seventh Circuit has