Opinion ID: 4564398
Heading Depth: 2
Heading Rank: 4

Heading: the sec’s decision to open a formal

Text: INVESTIGATION IS NOT SUBJECT TO JUDICIAL REVIEW. The SEC next argues that due to the exception for “agency action committed to agency discretion by law,” 5 U.S.C. § 701(a)(2), sovereign immunity prevents judicial review of its Formal Order of Investigation. That is correct: an agency decision to exercise its investigative power overcomes the “basic presumption” in favor of judicial review of agency action. Abbott Labs. v. Gardner, 387 U.S. 136, 140 (1967). The § 701(a)(2) exception applies only in “those rare circumstances where the relevant statute is drawn so that a court would have no meaningful standard against which to judge the agency’s exercise of discretion.” Lincoln v. Vigil, 508 U.S. 182, 191 (1993) (internal quotation marks and 14 citations omitted); see also Weyerhaeuser Co. v. U.S. Fish & Wildlife Serv., 139 S. Ct. 361, 370 (2018). Those situations often involve “a complicated balancing of a number of factors which are peculiarly within [the agency’s] expertise.” Chaney, 470 U.S. at 831. And precedent has identified several classes of agency decisions governed by a “tradition of nonreviewability.” ICC v. Bhd. of Locomotive Eng’rs, 482 U.S. 270, 282 (1987). Those include decisions to refrain from enforcement or investigative activity,12 decisions 12 Chaney, 470 U.S. at 838 (“[A]gency refusals to institute investigative or enforcement proceedings [are committed to agency discretion], unless Congress has indicated otherwise.”); S. Ry. Co. v. Seaboard Allied Milling Corp., 442 U.S. 444, 46164 (1979); Am. Disabled for Attendant Programs Today v. U.S. Dep’t of Housing & Urban Dev., 170 F.3d 381, 384 (3d Cir. 1999) (opining, in a failure to investigate case, that Chaney “established a presumption against judicial review of agency decisions that involve whether to undertake investigative or enforcement actions” (emphasis in original)); see also Webster v. Doe, 486 U.S. 592, 608 (1988) (Scalia, J., dissenting) (“A United States Attorney’s decision to prosecute, for example, will not be reviewed on the claim that it was prompted by personal animosity.”); United States v. Nixon, 418 U.S. 683, 693 (1974) (“[T]he Executive Branch has exclusive authority and absolute discretion to decide whether to prosecute a case . . . .”); see generally Sec. & Exchange Comm’n v. WheelingPittsburgh Steel Corp., 648 F.2d 118, 127 n.12 (3d Cir. 1981) (collecting cases); Leighton v. Sec. & Exchange Comm’n, 221 F.2d 91, 91-92 (D.C. Cir. 1955) (per curiam) (“The discretionary character of the [SEC]’s action [to refuse to investigate] likewise removes it from Section 10 of the [APA], 15 implicating intelligence and national security concerns,13 and the spending of lump-sum appropriations.14 As with those scenarios, a decision to investigate involves a complicated balancing of several factors peculiarly within the agency’s expertise, including the allocation of scarce resources. Most acutely bearing on this case are the Supreme Court’s holdings that agency decisions not to investigate, Seaboard Allied Milling, 442 U.S. at 461-64, and not to prosecute, Chaney, 470 U.S. at 838, are committed to agency discretion by law. Yet the same set of considerations governs both decisions to investigate and decisions not to investigate. And without judicially manageable standards to evaluate those considerations, an agency decision to investigate is similarly committed to agency discretion by law. Nor has Congress by statute or the SEC by regulation articulated specific standards governing a decision to initiate an investigation under the Exchange Act.15 Thus, without judicially manageable which excepts from its provisions for judicial review agency action committed by law to agency discretion.”). 13 Webster, 486 U.S. at 600-01. 14 Lincoln, 508 U.S. at 192-93; see also State of N.J. v. United States, 91 F.3d 463, 471 (3d Cir. 1996). 15 See 15 U.S.C. § 78u(a) (“The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated, is violating, or is about to violate any provisions of [the SEC].”); 17 C.F.R. § 200.66 (stating only that “[t]he requirements of the particular 16 standards, an agency’s decision on whether to investigate is a matter committed to agency discretion by law. Gentile attempts to avoid this outcome by limiting his challenges to two components of the SEC’s investigation: its nexus to him and its allegedly retributive motive. See Compl. ¶ 101 (App. 45). But the exception in § 701(a)(2) pertains to “agency action [that] is committed to agency discretion by law,” and thus it shields the entirety of an agency action that is committed to agency discretion by law. 5 U.S.C. § 701(a)(2) (emphasis added). A litigant cannot, therefore, avoid the exception by challenging only the most problematic component of an agency action that is committed to agency discretion by law. And here, because an agency decision to investigate fits within the § 701(a)(2) exception, targeted piecemeal challenges to that action fall outside of the APA’s waiver of sovereign immunity. In sum, while even the SEC recognizes that its “power to investigate carries with it the power to defame and destroy,” 17 C.F.R. § 200.66, the doctrine of sovereign immunity bars Gentile’s direct challenge under the APA to the SEC’s decision to open an investigation.