Opinion ID: 3214287
Heading Depth: 3
Heading Rank: 1

Heading: Availability of Meaningful Judicial Review

Text: The respondents argue that § 78y fails to offer meaningful judicial review of their claims. Their primary contention is that § 78y only comes into play after the allegedly unlawful administrative process has run its course, at which time they will have suffered the very injury they seek to avoid, and no amount of postdeprivation relief can remedy it. Obviously, a court cannot enjoin a process that has already been completed. Thus, the argument goes, because § 78y cannot cure the injury they will suffer—enduring an unconstitutional administrative process—the respondents are entitled to bring their claims in the district court. The respondents’ argument fails at the outset. Enduring an unwanted administrative process, even at great cost, does not amount to an irreparable injury on its own. See FTC v. Standard Oil Co. of Cal., 449 U.S. 232, 244 (1980) (holding that the substantial burden of defending oneself in an unlawful administrative proceeding does not constitute irreparable injury); see also Bebo, 799 F.3d at 775 (“Every person hoping to enjoin an ongoing administrative proceeding could make this argument, yet courts consistently require plaintiffs to use the administrative review schemes established by Congress.”). The respondents do not contest this point. They instead assert that the administrative process here is not just unlawful—as the petitioner in Standard Oil had contended—but unconstitutional. We fail to see what difference that makes 22 Case: 15-12831 Date Filed: 06/17/2016 Page: 23 of 37 here. Whether an injury has constitutional dimensions is not the linchpin in determining its capacity for meaningful judicial review. See Thunder Basin, 510 U.S. at 213-215. In Thunder Basin, the Supreme Court held that the petitioner could obtain meaningful judicial review through the administrative process, even though the petitioner challenged as unconstitutional that very process itself. Id. at 215. At issue was a provision of the Mine Act granting “‘[a] representative of the [mine] operator and a representative authorized by his miners . . . an opportunity to accompany the Secretary [of Labor] . . . during the physical inspection of any coal or other mine.’” Id. at 203 (quoting 30 U.S.C. § 813(f)). The representatives were also entitled to “certain health and safety information” and could “promote health and safety enforcement.” Id. A Mine Act regulation then authorized the miners to designate “‘[a]ny person or organization’” to serve as their representative to participate in the “walk-around” physical inspection when it occurs. Id. (quoting 30 C.F.R. § 40.1(b)(1)). A related regulation required that the mine post the names, addresses, and telephone numbers of the designees. Id. at 203-204 (citing 30 C.F.R. § 40.4). The miners at Thunder Basin designated employees of their union to represent them; Thunder Basin believed this designation violated collectivebargaining principles and its right to exclude union organizers from the property. Id. at 204. Thunder Basin thus objected to posting the names of the designees. Id. 23 Case: 15-12831 Date Filed: 06/17/2016 Page: 24 of 37 at 204-05. Thunder Basin apparently could have complied with the posting regulation and then sought review of the regulation. See id. at 221 (Scalia, J., concurring in part and concurring in the judgment). Or it could have refused to comply, begun to incur daily penalties, and meanwhile challenged the regulation through the statutory review process. Id. at 217-18 (majority opinion). Instead, Thunder Basin filed a lawsuit in federal district court raising its collectivebargaining arguments and adding a claim that requiring it to challenge the regulation through the statutory review process would violate due process. Id. at 205. The Supreme Court held that even if the claims could not be addressed by the agency, the “petitioner’s statutory and constitutional claims . . . [could] be meaningfully addressed in the Court of Appeals” under 30 U.S.C. § 816(a). Id. at 215. The Court rejected the argument that due process required initial review in the district court because “neither compliance with, nor continued violation of, the statute [would] subject [Thunder Basin] to a serious prehearing deprivation.” Id. at 216. In particular, the Court determined that the alleged harm was “entirely hypothetical,” in part because the designees would not receive advance notice of the physical inspection, and thus the nonemployee union representatives— individuals who were unlikely to be on site when the unannounced inspection occurred—were unlikely to be present to exercise walk-around rights. Id. at 217. 24 Case: 15-12831 Date Filed: 06/17/2016 Page: 25 of 37 And to the extent the petitioner would suffer any prehearing deprivation, the petitioner failed to “ma[ke] a colorable showing that full postdeprivation relief could not be obtained.” See id. at 213. Likewise, the respondents here have failed to show they will suffer any serious deprivation that the court of appeals cannot remedy under § 78y. For one thing, the Commission might decide that the respondents violated no securities laws and thus grant the SEC no relief. But even if the Commission imposes sanctions in its final order, the respondents will have two opportunities to obtain a stay of the Commission’s final order pending judicial review, once before the Commission, 17 C.F.R. § 201.401, and a second time before the court of appeals, 15 U.S.C. § 78y(c)(2). It is therefore entirely possible the respondents will suffer no deprivation before receiving judicial review. Like the petitioner in Thunder Basin, the respondents’ alleged pre-review injury is speculative at best. Moreover, even if the respondents are unable to obtain a stay pending judicial review, they have made no showing that full relief cannot be obtained after judicial review. To the contrary, § 78y grants the court of appeals the power to vacate a Commission order in whole, relieving the respondents of any liability. 15 U.S.C. § 78y(a)(3). This case simply does not present a situation where the respondents are likely to suffer irreparable injury while awaiting judicial review. See Thunder Basin, 510 U.S. at 218; Tilton, 2016 WL 3084795, at  (“Subsequent judicial review cannot 25 Case: 15-12831 Date Filed: 06/17/2016 Page: 26 of 37 restore [financial and emotional resources of litigation], but it can vacate the resulting judgment and remand for a new proceeding. That post-proceeding relief, although imperfect, suffices to vindicate the litigant’s constitutional claim.”). The respondents’ reliance on Mathews v. Eldridge, 424 U.S. 319 (1976), and its progeny is misplaced. In Eldridge, the Supreme Court held that a recipient of Social Security disability benefits was permitted to raise in federal district court a due process challenge to the administrative exhaustion requirements under 42 U.S.C. § 405(g)—providing judicial review for adverse social security benefits determinations—in part because the plaintiff otherwise would suffer irreparable injury. Id. at 331-32. The Court reached its conclusion in Eldridge based not on the constitutional nature of the plaintiff’s claims but instead on his “physical condition and dependency upon the disability benefits.” Id. at 331. The Court observed that an “erroneous termination would damage [the plaintiff] in a way not recompensable through retroactive payments.” Id.; accord Bowen v. City of N.Y., 476 U.S. 467, 483-84 (1986) (crediting the district court’s finding that disabled claimants, like the plaintiff in Eldridge, would suffer irreparable injury not only because they were denied the benefits they sought, but also because they would experience the “ordeal of having to go through the administrative appeal process[,] [which] may trigger a severe medical setback,” and thus “[i]nterim benefits [would] not adequately protect [the] plaintiffs from this harm” (internal quotation 26 Case: 15-12831 Date Filed: 06/17/2016 Page: 27 of 37 marks omitted)); Kreschollek v. S. Stevedoring Co., 78 F.3d 868, 873-75 (3d Cir. 1996) (concluding that despite Congress’s fairly discernible intent to preclude district court jurisdiction over ordinary challenges to a worker’s compensation decision, the administrative process was insufficient to provide full relief to a person whose benefits had been terminated). The respondents have made no showing that they will suffer a similar irreparable injury here. Contrary to their assertions, the respondents are not in the type of precarious position the Supreme Court found unacceptable in Free Enterprise Fund. 561 U.S. at 489-90. There, the petitioners sought to bring a constitutional challenge to the existence of the PCAOB, which, among other tasks, “promulgates auditing and ethics standards, performs routine inspections of all accounting firms, demands documents and testimony, and initiates formal investigations and disciplinary proceedings.” Id. at 485. The government argued that rather than bring a challenge in federal district court, the petitioners should simply ignore a request by the PCAOB, voluntarily “incur a sanction (such as a sizeable fine),” and then challenge that sanction in the administrative forum. Id. at 490. The Court held that this process did not offer a “meaningful avenue of relief.” Id. at 490-91 (internal quotation marks omitted). Plaintiffs should not be required “to bet the farm by taking the violative action before testing the validity of the law.” Id. at 490 (alteration adopted and internal quotation marks omitted). 27 Case: 15-12831 Date Filed: 06/17/2016 Page: 28 of 37 Unlike the petitioners in Free Enterprise Fund, however, the respondents here need not bet the farm to test the constitutionality of the ALJs’ appointment process. On the contrary, the respondents have already taken the actions that allegedly violated securities laws. See Jarkesy, 803 F.3d at 20 (“Jarkesy is already properly before the Commission by virtue of his alleged violations of those laws. Indeed, the existence of the enforcement proceedings gave rise to Jarkesy’s challenges.”); Bebo, 799 F.3d at 774 (observing that the “key factor in Free Enterprise Fund that rendered § 78y inadequate is missing” where the plaintiff does not “need to risk incurring a sanction voluntarily just to bring her constitutional challenges before a court of competent jurisdiction”); McNary, 498 U.S. at 496-97 (holding that because most undocumented aliens would need to “voluntarily surrender themselves for deportation” in order to ensure judicial review through the statutory review process, their claims escaped meaningful judicial review). In other words, to challenge the constitutional adequacy of the appointments of the SEC ALJs before the Commission, as opposed to the district court, the respondents must take no additional risks. We are also unmoved by the Gray respondents’ contention that the timing of their complaint in federal court—before the Commission initiated an administrative enforcement proceeding—grants them license to bypass the review procedures set out in § 78y. We rejected a similar argument in Doe v. FAA. 432 28 Case: 15-12831 Date Filed: 06/17/2016 Page: 29 of 37 F.3d 1259. There, aircraft mechanics received certification from a school that, according to the Federal Aviation Administration (“FAA”), had fraudulently examined and certified some of its applicants. Id. at 1260. Because the FAA could not determine which mechanics had received fraudulent certificates, the agency decided to reexamine all mechanics who received their certificates from the school during the relevant time. Id. The respondents filed a federal lawsuit, seeking an injunction instructing the FAA how to reexamine the mechanics. Id. We found meritless the mechanics’ argument that the administrative review process was inapplicable because the plaintiffs filed their lawsuit before the FAA took any certification action. Id. at 1262-63. “The mechanics,” we concluded, “simply cannot avoid the statutorily established administrative-review process by rushing to the federal courthouse for an injunction preventing the very action that would set the administrative-review process in motion.” Id. at 1263; see also Thunder Basin, 510 U.S. at 208, 216 (recognizing that the “[p]etitioner’s claims are ‘pre-enforcement’ only because the company sued before a citation was issued” and noting that the statutory judicial review procedure “does not distinguish between preenforcement and postenforcement challenges”). Similarly, here, it makes no difference that the Gray respondents filed their complaint in the face of 29 Case: 15-12831 Date Filed: 06/17/2016 Page: 30 of 37 an impending, rather than extant, enforcement action.6 The critical fact is that the Gray respondents can seek full postdeprivation relief under § 78y. Finally, we reject the Gray respondents’ contention that their claims will escape meaningful judicial review because of the “paltry discovery” available to them in the administrative forum. Gray Respondents’ Br. at 26. On this point, Elgin is instructive. The petitioners in Elgin were former federal competitive service employees who wished to challenge in federal court the constitutionality of a law under which they were fired for failing to register for the Selective Service. Elgin, 132 S. Ct. at 2131. They asserted that the agency could not develop a sufficient factual record because it lacked the authority to decide the legal question 6 Unlike the Gray respondents, we do not read the conclusions drawn in Bebo, Jarkesy, and Tilton as resting on the timing of the respondents’ federal lawsuit. In Bebo, the court simply stressed that as a “respondent in a pending enforcement proceeding, [the plaintiff] does not need to risk incurring a sanction voluntarily just to bring her constitutional challenges before a court of competent jurisdiction.” Bebo, 799 F.3d at 774. As explained above, the same is true for a person who faces an impending enforcement proceeding. The courts in Jarkesy and Tilton tangentially addressed the timing of the plaintiff’s complaint when they considered the “wholly collateral” factor. But in Jarkesy, the court merely theorized in dicta that “[t]he result might be different if a constitutional challenge were filed in court before the initiation of any administrative proceeding (and the plaintiff could establish standing to bring the judicial action).” Jarkesy, 803 F.3d at 23. Likewise, in Tilton, the court simply observed that unlike the Appointments Clause claim in Free Enterprise, which “was not moored to any proceeding that would provide for an administrative adjudication and subsequent judicial review,” the analogous claim in Tilton targeted an aspect of an ongoing proceeding. Tilton, 2016 WL 3084795, at . We are confident that the outcome would not have been different in Jarkesy or Tilton had the Appointments Clause claim challenged an aspect of a specific, forthcoming proceeding. In any event, we disagree with Jarkesy and Tilton to the extent they suggest that a district court might have jurisdiction to hear a constitutional challenge simply because it was filed before an impending administrative enforcement action. 30 Case: 15-12831 Date Filed: 06/17/2016 Page: 31 of 37 and that the appellate court lacked any factfinding capabilities whatsoever. Id. at 2138. The Supreme Court was unpersuaded. “Even without factfinding capabilities,” the Court reasoned, “the [appellate court] may take judicial notice of facts relevant to the constitutional question.” Id. Moreover, the CSRA “empowers the [agency] to take evidence and find facts for [appellate] review.” Id. As the Court explained, it made no difference if the agency lacked the authority to rule on the legal question because there was “nothing extraordinary in a statutory scheme that vests reviewable factfinding authority in a non-Article III entity that has jurisdiction over an action but cannot finally decide the legal question to which the facts pertain.” Id. We are equally confident that the respondents here can develop a sufficient factual record for meaningful appellate review under § 78y of their constitutional claims. The administrative process includes adequate tools for the Gray respondents to draw out the facts necessary to mount their constitutional challenge relating to the ALJs’ status as inferior officers. The Gray respondents may call witnesses to testify, for example, and if a witness is unavailable to testify, the respondents may seek leave to take that witness’s deposition at the Commission’s discretion. See 17 C.F.R. §§ 201.233, 201.234. The respondents may also request that the ALJ issue subpoenas when appropriate. See id. § 201.232. These tools, although less robust than those provided by the Federal Rules of Civil Procedure, 31 Case: 15-12831 Date Filed: 06/17/2016 Page: 32 of 37 do not leave the Gray respondents without a meaningful avenue to develop the record. Moreover, to the extent the Commission fails to develop a sufficient factual record, the reviewing court not only may take judicial notice of facts relevant to the constitutional questions, see Fed. R. Evid. 201, but under § 78y(a)(5) it may also remand to the Commission for further factfinding. Section 78y(a)(5) provides that if the appellate court determines, on a party’s motion, that “additional evidence is material and that there was reasonable ground for failure to adduce it before the Commission, the court may remand the case to the Commission for further proceedings, in whatever manner and on whatever conditions the court considers appropriate.” 15 U.S.C. § 78y(a)(5). The combined effect of these mechanisms adequately allows for the development of a sufficient factual record. In sum, we are without doubt that under § 78y the respondents can receive meaningful judicial review of their claims. 2. The “Wholly Collateral” and Agency Expertise Factors The remaining two factors do not cut strongly either way and thus do not persuade us that the respondents claims fall outside the scope of § 78y’s review scheme. See Tilton, 2016 WL 3084795, at  (“[A]lthough [the wholly collateral and agency expertise factors] present closer questions in this case, they do not persuasively demonstrate that the Appointments Clause claim falls outside the 32 Case: 15-12831 Date Filed: 06/17/2016 Page: 33 of 37 scope of the SEC’s overarching scheme.”). We first consider whether “agency expertise [could] be brought to bear on the . . . questions presented.” Thunder Basin, 510 U.S. at 215 (internal quotation marks omitted). Elgin tells us that it can here. See Elgin, 132 S. Ct. at 2140. In Elgin, the Supreme Court held that, if the agency can decide the merits of an underlying substantive claim and thus “obviate the need to address the constitutional challenge,” its expertise sufficiently “could be brought to bear” on the constitutional issues. Id. (internal quotation marks omitted); see also Thunder Basin, 510 U.S. at 215 (holding that even if the agency is powerless to address the constitutional question, so long as the claims “can be meaningfully addressed in the Court of Appeals,” the Court will not disregard the fairly discernible intent of Congress). As in Elgin, here the Commission might decide that the SEC’s substantive claims are meritless and thus would have no need to reach the constitutional claims. See Tilton, 2016 WL 3084795, at  (“[T]he Commission could rule that the appellants did not violate the Investment Advisers Act, in which case the constitutional question would become moot.”). 7 We are thus satisfied that the 7