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

Heading: Charles L. Hill, Jr.

Text: The respondent in the first case in this consolidated appeal is Charles L. Hill, Jr., a real estate developer in Georgia who is not registered with the SEC. In June and early July, 2011, Mr. Hill purchased several thousand shares of stock in a company called Radiant Systems, Inc. (“Radiant”). On July 11, 2011, after the markets closed, Radiant announced a merger agreement with NCR Corporation. The next day, Mr. Hill sold all of his Radiant shares, profiting in the amount of approximately $744,000. Mr. Hill maintained that he was unaware of the merger before its public announcement. Nonetheless, in February 2015, after a two-year investigation in which Mr. Hill cooperated fully with the SEC, the Commission served him with an OIP. The SEC sought a cease and desist order, a civil penalty, and disgorgement, alleging that Mr. Hill unlawfully profited from non-public information. The ALJ scheduled a hearing on the OIP for June 15, 2015. In the meantime, Mr. Hill filed two motions for summary disposition, the first challenging the merits of the claims against him and the second raising as affirmative defenses constitutional arguments going to the heart of the 7 Case: 15-12831 Date Filed: 06/17/2016 Page: 8 of 37 administrative process itself. Specifically, in the second motion Mr. Hill argued that (1) the administrative proceeding violates the removal protections of Article II of the United States Constitution because ALJs are protected by two layers of tenure, (2) administrative enforcement actions before an ALJ violate the nondelegation doctrine under Article I of the Constitution, and (3) the grant of discretion to the Commission to bring this action in an administrative forum violates his Seventh Amendment right to a jury trial. In separate orders, the ALJ denied both motions. As regards the constitutional issues, the ALJ concluded that he lacked authority to rule on the constitutionality of a particular provision of the Exchange Act and thus could not resolve Mr. Hill’s second and third arguments. The ALJ also expressed doubt that he had the authority to reach Mr. Hill’s first argument, but nonetheless rejected it on the merits. Five days after the ALJ issued his order on Mr. Hill’s constitutional challenges, Mr. Hill filed in federal district court a complaint and motion for a temporary restraining order seeking to enjoin the SEC proceedings. Mr. Hill raised the same constitutional arguments in the district court that he had raised before the ALJ and, in an amended complaint, added an additional claim under the Appointments Clause of Article II of the Constitution. This new claim asserted that, as constitutional inferior officers, the ALJs must be appointed by the President, department heads, or courts of law. Because the SEC conceded that 8 Case: 15-12831 Date Filed: 06/17/2016 Page: 9 of 37 ALJs are not appointed in that manner, Mr. Hill contended that the appointment of the ALJ in his case was unconstitutional. The SEC countered that the district court lacked jurisdiction over these claims because Congress designated the administrative forum and appeal procedure of § 78y as the exclusive avenue for deciding them. The SEC also disputed the merits of Mr. Hill’s claims. After oral argument, the district court issued a thorough order rejecting the SEC’s jurisdictional argument and holding that the Commission’s ALJs were inferior officers subject to the Appointments Clause. Because the ALJ was not appointed by the President, department heads, or courts of law, the district court held, the ALJ’s appointment likely was unconstitutional.2 On this basis, the court granted Mr. Hill’s motion for a temporary restraining order. Hill v. SEC, 114 F. Supp. 3d 1297, 1320 (N.D. Ga. 2015). The Commission appealed.