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15Ȭ2103ȱ
Tiltonȱv.ȱSECȱ
ȱ
UNITEDȱSTATESȱCOURTȱOFȱAPPEALSȱ ŗȱ
FORȱTHEȱSECONDȱCIRCUITȱ Řȱ
AugustȱTerm,ȱ2015ȱ řȱ
(Argued:ȱȱSeptemberȱ16,ȱ2015ȱ Decided:ȱȱJuneȱ1,ȱ2016)ȱ 4ȱ
DocketȱNo.ȱ15Ȭ2103ȱ śȱ
ȱ Ŝȱ
LynnȱTilton,ȱPatriarchȱPartners,ȱLLC,ȱPatriarchȱPartnersȱVIII,ȱLLC,ȱ 7ȱ
PatriarchȱPartnersȱXIV,ȱLLC,ȱandȱPatriarchȱPartnersȱXV,ȱLLC,ȱ 8ȱ
PlaintiffsȬAppellants,ȱ 9ȱ
v.ȱ ŗŖȱ
SecuritiesȱandȱExchangeȱCommission,ȱ ŗŗȱ
DefendantȬAppellee.ȱ ŗŘȱ
ȱ ŗřȱ
Before:ȱ NEWMAN,ȱS ACK,ȱandȱD RONEY ,ȱCircuitȱJudges.ȱ ŗ4ȱ
Theȱappellants,ȱLynnȱTiltonȱandȱseveralȱofȱherȱinvestmentȱfirms,ȱareȱ ŗśȱ
respondentsȱinȱanȱongoingȱadministrativeȱproceedingȱinitiatedȱbyȱtheȱSecuritiesȱ ŗŜȱ
andȱExchangeȱCommissionȱandȱconductedȱbyȱanȱadministrativeȱlawȱjudge.ȱȱTheyȱ ŗ7ȱ
broughtȱsuitȱinȱtheȱUnitedȱStatesȱDistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱ ŗ8ȱ
YorkȱtoȱenjoinȱtheȱCommissionȇsȱproceedingȱbeforeȱitsȱcompletion,ȱonȱtheȱtheoryȱ ŗ9ȱ
thatȱtheȱadministrativeȱlawȱjudgeȇsȱappointmentȱviolatedȱtheȱAppointmentsȱ ŘŖȱ
ClauseȱofȱArticleȱIIȱofȱtheȱUnitedȱStatesȱConstitution.ȱȱTheȱdistrictȱcourtȱ(Ronnieȱ Řŗȱ
Abrams,ȱJudge)ȱdismissedȱtheȱsuitȱforȱlackȱofȱsubjectȱmatterȱjurisdiction.ȱȱTheȱ ŘŘȱ

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Ř

appellantsȱnowȱaskȱusȱtoȱoverturnȱthatȱdismissalȱandȱreachȱtheȱmeritsȱofȱtheirȱ ŗȱ
constitutionalȱargument.ȱȱWeȱagreeȱwithȱtheȱdistrictȱcourt,ȱhowever,ȱthatȱ Řȱ
Congressȱimplicitlyȱprecludedȱfederalȱjurisdictionȱoverȱtheȱappellantsȇȱ řȱ
AppointmentsȱClauseȱclaimȱwhileȱtheȱCommissionȇsȱproceedingȱremainsȱ 4ȱ
pending.ȱȱTheȱjudgmentȱofȱtheȱdistrictȱcourtȱisȱthereforeȱ śȱ
AFFIRMED.ȱ Ŝȱ
JudgeȱNEWMANȱconcursȱinȱaȱseparateȱopinion.ȱȱȱ 7ȱ
JudgeȱDRONEYȱdissentsȱinȱaȱseparateȱopinion.ȱ 8ȱ
DAVIDȱM.ȱZORNOW,ȱSkadden,ȱArps,ȱ 9ȱ
Slate,ȱMeagherȱ&ȱFlomȱLLP,ȱNewȱYork,ȱNYȱ ŗŖȱ
(ChristopherȱJ.ȱGunther,ȱonȱtheȱbrief),ȱforȱ ŗŗȱ
PlaintiffsȬAppellants.ȱ ŗŘȱ
SusanȱE.ȱBruneȱ(onȱtheȱbrief),ȱBruneȱ&ȱ ŗřȱ
RichardȱLLP,ȱNewȱYork,ȱNY,ȱforȱPlaintiffsȬ ŗ4ȱ
Appellants.ȱ ŗśȱ
MARKȱB.ȱSTERN,ȱAppellateȱStaffȱAttorneyȱ ŗŜȱ
(MarkȱR.ȱFreemanȱandȱMeganȱBarbero,ȱ ŗ7ȱ
AppellateȱStaffȱAttorneys,ȱonȱtheȱbrief),ȱforȱ ŗ8ȱ
BenjaminȱC.ȱMizer,ȱPrincipalȱDeputyȱȱ ŗ9ȱ
AssistantȱAttorneyȱGeneral,ȱandȱBethȱS.ȱ ŘŖȱ
Brinkmann,ȱDeputyȱAssistantȱAttorneyȱ Řŗȱ
General,ȱUnitedȱStatesȱDepartmentȱofȱ ŘŘȱ
Justice,ȱWashington,ȱDC,ȱforȱDefendantȬ Řřȱ
Appellee.ȱ Ř4ȱ
JeannetteȱA.ȱVargasȱ(onȱtheȱbrief),ȱforȱPreetȱ Řśȱ
Bharara,ȱUnitedȱStatesȱAttorneyȱforȱtheȱ ŘŜȱ

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SouthernȱDistrictȱofȱNewȱYork,ȱforȱ ŗȱ
DefendantȬAppellee.ȱ Řȱ
ȱ řȱ
S ACK,ȱCircuitȱJudge:ȱ 4ȱ
TheȱSecuritiesȱandȱExchangeȱCommissionȱ(theȱȈSECȈȱorȱtheȱȈCommissionȈ)ȱ śȱ
enforcesȱtheȱfederalȱsecuritiesȱlawsȱby,ȱamongȱotherȱthings,ȱfilingȱactionsȱseekingȱ Ŝȱ
monetaryȱpenaltiesȱagainstȱallegedȱtransgressors.ȱȱUnderȱtheȱ2010ȱDoddȬFrankȱ 7ȱ
WallȱStreetȱReformȱandȱConsumerȱProtectionȱActȱ(theȱȈDoddȬFrankȱActȈ),ȱPub.ȱL.ȱ 8ȱ
No.ȱ111Ȭ203,ȱ12ŮȱStat.ȱ13ű6,ȱtheȱSECȇsȱenforcementȱactionsȱgenerallyȱmayȱtakeȱ 9ȱ
eitherȱofȱtwoȱforms:ȱaȱcivilȱlawsuitȱinȱfederalȱdistrictȱcourt,ȱorȱanȱadministrativeȱ ŗŖȱ
proceedingȱconductedȱbyȱtheȱCommissionȱorȱanȱadministrativeȱlawȱjudgeȱ ŗŗȱ
(ȈALJȈ).ȱȱWhereȱbothȱofȱthoseȱalternativesȱareȱavailable,ȱtheȱchoiceȱbetweenȱthemȱ ŗŘȱ
belongsȱtoȱtheȱSECȱwithoutȱexpressȱstatutoryȱconstraint.ȱ ŗřȱ
Inȱthisȱcase,ȱtheȱSECȱchoseȱtoȱseekȱpenaltiesȱagainstȱtheȱappellants,ȱLynnȱ ŗ4ȱ
Tiltonȱandȱseveralȱofȱherȱinvestmentȱfirms,ȱbyȱcommencingȱanȱadministrativeȱ ŗśȱ
proceedingȱconductedȱbyȱanȱALJ.ȱȱThatȱproceedingȱisȱsubjectȱtoȱtwoȱlayersȱofȱ ŗŜȱ
review:ȱȱAȱpartyȱthatȱlosesȱbeforeȱtheȱALJȱmayȱpetitionȱforȱdeȱnovoȱreviewȱbyȱtheȱ ŗ7ȱ
Commission,ȱandȱaȱpartyȱthatȱlosesȱbeforeȱtheȱCommissionȱmayȱpetitionȱforȱ ŗ8ȱ
reviewȱbyȱaȱfederalȱcourtȱofȱappeals.ȱȱNotȱunlikeȱaȱlawsuitȱinȱdistrictȱcourt,ȱ ŗ9ȱ

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4

therefore,ȱtheȱadministrativeȱproceedingȱultimatelyȱoffersȱtheȱlosingȱpartyȱaȱrouteȱ ŗȱ
toȱfederalȱappellateȱreview.ȱ Řȱ
TheȱappellantsȱcontendȱthatȱtheȱSECȇsȱadministrativeȱproceedingȱisȱ řȱ
unconstitutionalȱbecauseȱtheȱpresidingȱALJȇsȱappointmentȱviolatedȱArticleȱIIȇsȱ 4ȱ
AppointmentsȱClause.ȱȱTheyȱhaveȱraisedȱthatȱclaimȱasȱanȱaffirmativeȱdefenseȱ śȱ
withinȱtheȱproceedingȱandȱwillȱbeȱableȱtoȱargueȱtheȱissueȱinȱaȱfederalȱcourtȱofȱ Ŝȱ
appealsȱifȱtheyȱloseȱbeforeȱtheȱCommission.ȱȱTheȱappellantsȱneverthelessȱsoughtȱ 7ȱ
moreȱimmediateȱaccessȱtoȱfederalȱcourt:ȱȱTwoȱdaysȱafterȱtheȱadministrativeȱ 8ȱ
proceedingȱagainstȱthemȱbegan,ȱtheyȱfiledȱaȱseparateȱlawsuitȱinȱtheȱUnitedȱStatesȱ 9ȱ
DistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱYorkȱassertingȱtheirȱ ŗŖȱ
AppointmentsȱClauseȱclaimȱandȱseekingȱanȱinjunctionȱagainstȱtheȱALJȇsȱ ŗŗȱ
adjudicationȱbasedȱonȱitsȱallegedȱunconstitutionality.ȱ ŗŘȱ
Theȱdistrictȱcourtȱ(RonnieȱAbrams,ȱJudge)ȱdismissedȱtheȱsuitȱforȱlackȱofȱ ŗřȱ
subjectȱmatterȱjurisdiction.ȱȱRelyingȱinȱpartȱonȱtheȱSupremeȱCourtȇsȱdecisionsȱinȱ ŗ4ȱ
Elginȱv.ȱDepartmentȱofȱTreasury,ȱȬȬȬȱU.S.ȱȬȬȬ,ȱ132ȱS.ȱCt.ȱ2126ȱ(2012),ȱFreeȱEnterpriseȱ ŗśȱ
Fundȱv.ȱPublicȱCo.ȱAccountingȱOversightȱBoard,ȱ561ȱU.S.ȱŮűűȱ(2010),ȱandȱThunderȱ ŗŜȱ
BasinȱCoalȱCo.ȱv.ȱReich,ȱ510ȱU.S.ȱ200ȱ(1ųųŮ),ȱtheȱcourtȱconcludedȱthatȱtheȱ ŗ7ȱ
appellantsȇȱAppointmentsȱClauseȱchallengeȱfellȱwithinȱtheȱexclusiveȱscopeȱofȱtheȱ ŗ8ȱ

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ś

SECȇsȱadministrativeȱreviewȱschemeȱandȱcouldȱreachȱaȱfederalȱcourtȱonlyȱonȱ ŗȱ
petitionȱforȱreviewȱofȱaȱfinalȱdecisionȱbyȱtheȱCommission.ȱ Řȱ
Weȱagree.ȱȱByȱenactingȱtheȱSECȇsȱcomprehensiveȱschemeȱofȱadministrativeȱ řȱ
andȱjudicialȱreview,ȱCongressȱimplicitlyȱprecludedȱfederalȱdistrictȱcourtȱ 4ȱ
jurisdictionȱoverȱtheȱappellantsȇȱconstitutionalȱchallenge.ȱ śȱ
BACKGROUNDȱ Ŝȱ
Untilȱ2010,ȱtheȱSECȇsȱauthorityȱtoȱimposeȱmonetaryȱpenaltiesȱthroughȱ 7ȱ
administrativeȱproceedingsȱwasȱrelativelyȱlimited.ȱȱTheȱagencyȱcouldȱnot,ȱforȱ 8ȱ
example,ȱpenalizeȱaȱnonȬregulatedȱpersonȱsuchȱasȱTiltonȱthroughȱadministrativeȱ 9ȱ
channels.ȱȱTheȱDoddȬFrankȱActȱdramaticallyȱexpandedȱtheȱSECȇsȱauthorityȱtoȱ ŗŖȱ
imposeȱpenaltiesȱadministratively,ȱmakingȱitȱessentiallyȱ“coextensiveȱwithȱ[theȱ ŗŗȱ
SEC’s]ȱauthorityȱtoȱseekȱpenaltiesȱinȱFederalȱcourt.”ȱȱH.R.ȱRep.ȱNo.ȱ111–6Ųű,ȱatȱűŲȱ ŗŘȱ
(2010).ȱȱSinceȱthen,ȱtheȱSECȱhasȱreportedlyȱprosecutedȱanȱincreasingȱnumberȱofȱ ŗřȱ
casesȱthroughȱadministrativeȱproceedings,ȱwithȱaȱrateȱofȱsuccessȱnotablyȱhigherȱ ŗ4ȱ
thanȱitȱhasȱachievedȱinȱfederalȱdistrictȱcourts.ȱȱSeeȱJeanȱEaglesham,ȱInȬHouseȱ ŗśȱ
JudgesȱHelpȱSECȱRackȱUpȱWins,ȱWallȱSt.ȱJ.,ȱMayȱű,ȱ2015,ȱatȱA1.ȱ ŗŜȱ
WhenȱtheȱCommissionȱchoosesȱtoȱseekȱpenaltiesȱadministratively,ȱitȱmustȱ ŗ7ȱ
eitherȱpresideȱoverȱtheȱproceedingȱitselfȱorȱdesignateȱaȱhearingȱofficerȱ—ȱusuallyȱ ŗ8ȱ

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Ŝ

anȱALJȱ—ȱtoȱdoȱso.ȱȱSeeȱ1űȱC.F.R.ȱ§ȱ201.110.ȱȱAȱpresidingȱALJȱhasȱauthorityȱtoȱ ŗȱ
issueȱanȱinitialȱdecision,ȱwhichȱmayȱbecomeȱfinalȱonlyȱbyȱorderȱofȱtheȱ Řȱ
Commission.ȱȱSeeȱid.ȱ§ȱ201.360.ȱȱIfȱaȱpartyȱpetitionsȱforȱreviewȱofȱtheȱALJȇsȱinitialȱ řȱ
decision,ȱtheȱCommissionȱordinarilyȱreviewsȱtheȱdecisionȱdeȱnovoȱbeforeȱissuingȱaȱ 4ȱ
finalȱorder.ȱȱSeeȱid.ȱ§ȱ201.Ů11.ȱȱAndȱaȱfinalȱorderȱissuedȱunderȱtheȱsecuritiesȱlaws,ȱ śȱ
includingȱtheȱInvestmentȱAdvisersȱActȱofȱ1ųŮ0,ȱ15ȱU.S.C.ȱ§ȱŲ0bȬ1ȱetȱseq.,ȱisȱinȱturnȱ Ŝȱ
subjectȱtoȱjudicialȱreviewȱbyȱaȱfederalȱcourtȱofȱappeals,ȱseeȱid.ȱ§ȱŲ0b–13(a)ȱ 7ȱ
(providingȱthatȱȈ[a]nyȱpersonȱorȱpartyȱaggrievedȱbyȱanȱorderȱissuedȱbyȱtheȱ 8ȱ
Commissionȱunderȱ[theȱInvestmentȱAdvisersȱAct]ȱmayȱobtainȱaȱreviewȱofȱsuchȱ 9ȱ
orderȱinȱtheȱUnitedȱStatesȱcourtȱofȱappealsȱwithinȱanyȱcircuitȱwhereinȱsuchȱ ŗŖȱ
personȱresidesȱorȱhasȱhisȱprincipalȱofficeȱorȱplaceȱofȱbusiness,ȱorȱinȱtheȱUnitedȱ ŗŗȱ
StatesȱCourtȱofȱAppealsȱforȱtheȱDistrictȱofȱColumbiaȈ).ȱ ŗŘȱ
Duringȱtheȱpastȱyearȱorȱso,ȱseveralȱrespondentsȱinȱongoingȱSECȱ ŗřȱ
administrativeȱproceedingsȱhaveȱassertedȱthatȱArticleȱIIȱofȱtheȱUnitedȱStatesȱ ŗ4ȱ
ConstitutionȱbarsȱtheȱagencyȇsȱALJsȱfromȱactingȱasȱhearingȱofficers.ȱȱTheseȱ ŗśȱ
respondentsȱhaveȱmadeȱtwoȱdistinctȱconstitutionalȱarguments:ȱthatȱtheȱALJsȱareȱ ŗŜȱ
impermissiblyȱinsulatedȱfromȱpresidentialȱremoval,ȱandȱthatȱtheyȱwereȱnotȱ ŗ7ȱ

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7

appointedȱinȱaccordanceȱwithȱtheȱAppointmentsȱClause.ŗȱȱRespondentsȱmayȱ ŗȱ
raiseȱthoseȱargumentsȱasȱaffirmativeȱdefensesȱduringȱtheȱcourseȱofȱtheirȱ Řȱ
administrativeȱproceedings,ȱsubjectȱtoȱpotentialȱjudicialȱreviewȱinȱtheȱeventȱofȱanȱ řȱ
adverseȱdecisionȱbyȱtheȱCommission.ȱȱSeekingȱmoreȱimmediateȱjudicialȱscrutiny,ȱ 4ȱ
however,ȱsomeȱrespondentsȱ—ȱtheȱappellantsȱamongȱthemȱ—ȱattemptedȱtoȱraiseȱ śȱ
theirȱArticleȱIIȱclaimsȱinȱparallelȱactionsȱbroughtȱinȱfederalȱdistrictȱcourtsȱbeforeȱ Ŝȱ
theirȱadministrativeȱproceedingsȱconcluded.ȱȱSeeȱSpringȱHillȱCapitalȱPartners,ȱLLCȱ 7ȱ
v.ȱSEC,ȱNo.ȱ15ȬCVȬŮ5Ů2ȱ(S.D.N.Y.ȱ2015)ȱ(challengingȱALJȇsȱappointment);ȱHillȱv.ȱ 8ȱ
SEC,ȱNo.ȱ1:15ȬCVȬ1Ų01ȱ(N.D.ȱGa.ȱ2015)ȱ(challengingȱALJȇsȱappointmentȱandȱ 9ȱ
insulationȱfromȱremoval);ȱDukaȱv.ȱSEC,ȱNo.ȱ15ȬCVȬ35űȱ(S.D.N.Y.ȱ2015)ȱ ŗŖȱ
(challengingȱALJȇsȱappointmentȱandȱinsulationȱfromȱremoval);ȱBeboȱv.ȱSEC,ȱNo.ȱ ŗŗȱ
15ȬCȬ3ȱ(E.D.ȱWis.ȱ2015)ȱ(challengingȱALJȇsȱinsulationȱfromȱremoval).ȱ ŗŘȱ

ŗȱTheȱAppointmentsȱClauseȱreadsȱinȱpertinentȱpart:ȱȱȱ
[TheȱPresident]ȱshallȱnominate,ȱandȱbyȱandȱwithȱtheȱAdviceȱandȱConsentȱ
ofȱtheȱSenate,ȱshallȱappointȱAmbassadors,ȱotherȱpublicȱMinistersȱandȱ
Consuls,ȱJudgesȱofȱtheȱsupremeȱCourt,ȱandȱallȱotherȱOfficersȱofȱtheȱUnitedȱ
States,ȱwhoseȱAppointmentsȱareȱnotȱhereinȱotherwiseȱprovidedȱfor,ȱandȱ
whichȱshallȱbeȱestablishedȱbyȱLaw:ȱbutȱtheȱCongressȱmayȱbyȱLawȱvestȱtheȱ
AppointmentȱofȱsuchȱinferiorȱOfficers,ȱasȱtheyȱthinkȱproper,ȱinȱtheȱ
Presidentȱalone,ȱinȱtheȱCourtsȱofȱLaw,ȱorȱinȱtheȱHeadsȱofȱDepartments.ȱ
U.S.ȱConst.ȱArt.ȱII,ȱ§ȱŘ,ȱcl.ȱŘ.ȱ

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Inȱtheȱcaseȱatȱbar,ȱtheȱSECȱinitiatedȱanȱadministrativeȱproceedingȱbeforeȱanȱ ŗȱ
ALJȱinȱMarchȱ2015,ȱallegingȱthatȱtheȱappellantsȱhadȱviolatedȱtheȱInvestmentȱ Řȱ
AdvisersȱAct.ȱȱTwoȱdaysȱlater,ȱtheȱappellantsȱfiledȱthisȱlawsuitȱinȱtheȱUnitedȱ řȱ
StatesȱDistrictȱCourtȱforȱtheȱSouthernȱDistrictȱofȱNewȱYork.ȱȱTheyȱsoughtȱtoȱ 4ȱ
enjoinȱtheȱSECȇsȱadministrativeȱproceedingȱonȱtheȱgroundȱthat,ȱamongȱotherȱ śȱ
things,ȱtheȱpresidingȱALJȇsȱappointmentȱviolatedȱtheȱAppointmentsȱClause.ŘȱȱTheȱ Ŝȱ
SECȱmovedȱtoȱdismissȱtheȱsuit,ȱarguingȱinȱpartȱ—ȱasȱitȱhasȱinȱcasesȱbroughtȱbyȱ 7ȱ
similarlyȱsituatedȱrespondentsȱ—ȱthatȱtheȱdistrictȱcourtȱlackedȱsubjectȱmatterȱ 8ȱ
jurisdictionȱoverȱtheȱlawsuit.ȱȱInȱtheȱCommissionȇsȱview,ȱtheȱadministrativeȱ 9ȱ
proceedingȱatȱissue,ȱonceȱbegun,ȱprecludedȱtheȱappellantsȇȱcollateralȱ ŗŖȱ
AppointmentsȱClauseȱchallenge.ȱ ŗŗȱ
Whileȱtheȱdistrictȱcourtȱheardȱargumentȱandȱdeliberated,ȱseveralȱotherȱ ŗŘȱ
federalȱjudgesȱreachedȱconflictingȱdecisionsȱonȱtheȱsameȱjurisdictionalȱissue,ȱ ŗřȱ
creatingȱaȱsplitȱbothȱwithinȱandȱoutsideȱtheȱSouthernȱDistrict.ȱȱCompareȱSpringȱ ŗ4ȱ
Hill,ȱNo.ȱ15ȬCVȬŮ5Ů2ȱ(S.D.N.Y.ȱJuneȱ26,ȱ2015)ȱ(benchȱruling)ȱ(Ramos,ȱJ.)ȱ ŗśȱ
(concludingȱthatȱtheȱcourtȱlackedȱjurisdictionȱoverȱaȱrespondentȇsȱArticleȱIIȱ ŗŜȱ

ŘȱTheȱappellantsȱalsoȱarguedȱbeforeȱtheȱdistrictȱcourtȱthatȱtheirȱpresidingȱALJȱwasȱ
impermissiblyȱinsulatedȱfromȱpresidentialȱremoval.ȱȱTheyȱhaveȱnotȱpressedȱthatȱ
argumentȱonȱappeal,ȱalthoughȱtheyȱpurportȱtoȱhaveȱȈpreserve[d]Ȉȱit.ȱȱAppellantsȇȱBr.ȱatȱ
řŗȱn.ŗŖ.ȱ

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challengeȱtoȱtheȱALJȱconductingȱanȱongoingȱadministrativeȱproceeding),ȱwithȱHillȱ ŗȱ
v.ȱSEC,ȱ11ŮȱF.ȱSupp.ȱ3dȱ12ųűȱ(N.D.ȱGa.ȱ2015)ȱ(concludingȱthatȱthereȱwasȱsuchȱ Řȱ
jurisdiction),ȱandȱDukaȱv.ȱSEC,ȱ103ȱF.ȱSupp.ȱ3dȱ3Ų2,ȱ3ų2ȱ(S.D.N.Y.ȱ2015)ȱ(same);ȱseeȱ řȱ
alsoȱBeboȱv.ȱSEC,ȱ2015ȱWLȱų053Ůų,ȱatȱ*Ů,ȱ2015ȱU.S.ȱDist.ȱLEXISȱ25660,ȱatȱ*10ȱ(E.D.ȱ 4ȱ
Wis.ȱMar.ȱ3,ȱ2015)ȱ(concluding,ȱbeforeȱtheȱcaseȱatȱbarȱwasȱfiled,ȱthatȱtheȱcourtȱ śȱ
lackedȱjurisdictionȱoverȱaȱrespondentȇsȱArticleȱIIȱchallengeȱtoȱtheȱALJȱconductingȱ Ŝȱ
anȱongoingȱadministrativeȱproceeding),ȱaffȇd,ȱűųųȱF.3dȱű65ȱ(űthȱCir.ȱ2015).ȱȱOnȱ 7ȱ
Juneȱ30,ȱ2015,ȱafterȱweighingȱtheȱmeritsȱofȱthoseȱinterveningȱdecisions,ȱtheȱ 8ȱ
districtȱcourtȱdecidedȱinȱfavorȱofȱtheȱSEC,ȱdismissingȱtheȱappellantsȇȱsuitȱasȱ 9ȱ
implicitlyȱprecludedȱbyȱtheȱCommissionȇsȱstatutoryȱschemeȱofȱadministrativeȱ ŗŖȱ
andȱjudicialȱreview.ȱȱTiltonȱv.ȱSEC,ȱNo.ȱ15ȬCVȬ2Ůű2,ȱ2015ȱWLȱŮ006165,ȱatȱ*1,ȱ2015ȱ ŗŗȱ
U.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*2Ȭ3ȱ(S.D.N.Y.ȱJuneȱ30,ȱ2015).ȱ ŗŘȱ
Theȱappellantsȱnowȱaskȱusȱtoȱreverseȱtheȱdistrictȱcourtȇsȱjurisdictionalȱ ŗřȱ
dismissalȱofȱtheirȱAppointmentsȱClauseȱclaimȱandȱrule,ȱonȱtheȱmerits,ȱthatȱtheȱ ŗ4ȱ
ALJȱpresidingȱoverȱtheirȱadministrativeȱproceedingȱwasȱunconstitutionallyȱ ŗśȱ
appointed.ȱȱAtȱtheȱappellantsȇȱrequest,ȱweȱhaveȱstayedȱtheȱSECȇsȱproceedingȱ ŗŜȱ
pendingȱourȱdecisionȱinȱthisȱappeal.ȱȱWeȱreviewȱtheȱdistrictȱcourtȇsȱdeterminationȱ ŗ7ȱ

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ŗŖ

ofȱsubjectȱmatterȱjurisdictionȱdeȱnovo.ȱȱScelsaȱv.ȱCityȱUniv.ȱofȱN.Y.,ȱű6ȱF.3dȱ3ű,ȱŮ0ȱ ŗȱ
(2dȱCir.ȱ1ųų6).ȱ Řȱ
DISCUSSIONȱ řȱ
TheȱstatutesȱthatȱestablishȱtheȱSECȇsȱschemeȱofȱadministrativeȱandȱjudicialȱ 4ȱ
review,ȱincludingȱtheȱDoddȬFrankȱActȱandȱtheȱInvestmentȱAdvisersȱAct,ȱdoȱnotȱ śȱ
expresslyȱprecludeȱfederalȱdistrictȱcourtȱjurisdictionȱoverȱtheȱappellantsȇȱ Ŝȱ
AppointmentsȱClauseȱclaim.ȱȱTheȱcrucialȱjurisdictionalȱissueȱinȱthisȱcase,ȱ 7ȱ
therefore,ȱisȱwhetherȱtheȱstatutesȱdoȱsoȱimplicitly.ȱȱȱ 8ȱ
Toȱresolveȱthatȱissue,ȱweȱmustȱfirstȱdetermineȱwhetherȱitȱisȱȈfairlyȱ 9ȱ
discernibleȈȱfromȱtheȱȈtext,ȱstructure,ȱandȱpurposeȈȱofȱtheȱsecuritiesȱlawsȱthatȱ ŗŖȱ
CongressȱintendedȱtheȱSECȇsȱschemeȱofȱadministrativeȱandȱjudicialȱreviewȱȈtoȱ ŗŗȱ
precludeȱdistrictȱcourtȱjurisdiction.ȈȱȱElgin,ȱ132ȱS.ȱCt.ȱatȱ2132Ȭ33.ȱȱThatȱinitialȱ ŗŘȱ
inquiryȱisȱguidedȱbyȱtheȱpropositionȱthatȱȈ[g]enerally,ȱwhenȱCongressȱcreatesȱ ŗřȱ
proceduresȱdesignedȱtoȱpermitȱagencyȱexpertiseȱtoȱbeȱbroughtȱtoȱbearȱonȱ ŗ4ȱ
particularȱproblems,ȱthoseȱproceduresȱareȱtoȱbeȱexclusive.ȈȱȱFreeȱEnterprise,ȱ561ȱ ŗśȱ
U.S.ȱatȱŮŲųȱ(internalȱquotationȱmarksȱomitted).ȱȱȱ ŗŜȱ
IfȱweȱconcludeȱthatȱtheȱSECȇsȱschemeȱprecludesȱdistrictȱcourtȱjurisdiction,ȱ ŗ7ȱ
weȱmustȱthenȱdecideȱwhetherȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱȈofȱ ŗ8ȱ

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ŗŗ

theȱtypeȱCongressȱintendedȱtoȱbeȱreviewedȱwithinȱth[e]ȱstatutoryȱstructure.ȈȱȱId.ȱ ŗȱ
(alterationȱinȱoriginal)ȱ(quotingȱThunderȱBasin,ȱ510ȱU.S.ȱatȱ20ű).ȱȱThisȱsecondȱ Řȱ
inquiryȱisȱguidedȱbyȱtheȱSupremeȱCourtȇsȱdecisionsȱinȱThunderȱBasin,ȱFreeȱ řȱ
EnterpriseȱandȱElgin,ȱwhichȱinstructȱusȱtoȱȈpresumeȈȱthatȱaȱclaimȱisȱnotȱconfinedȱ 4ȱ
toȱadministrativeȱchannelsȱȈifȱȇaȱfindingȱofȱpreclusionȱcouldȱforecloseȱallȱ śȱ
meaningfulȱjudicialȱreviewȇ;ȱifȱtheȱsuitȱisȱȇwhollyȱcollateralȱtoȱaȱstatuteȇsȱreviewȱ Ŝȱ
provisionsȇ;ȱandȱifȱtheȱclaimsȱareȱȇoutsideȱtheȱagencyȇsȱexpertise.ȇȈȱȱId.ȱ(quotingȱ 7ȱ
ThunderȱBasin,ȱ510ȱU.S.ȱatȱ212Ȭ13).ȱȱWeȱreferȱtoȱthoseȱconsiderationsȱasȱtheȱ 8ȱ
ThunderȱBasinȱfactors.ȱ 9ȱ
Ourȱresolutionȱofȱtheseȱtwoȱinquiriesȱ—ȱwhetherȱCongressȱintendedȱtheȱ ŗŖȱ
SECȇsȱadministrativeȱschemeȱtoȱprecludeȱdistrictȱcourtȱjurisdiction,ȱandȱwhetherȱ ŗŗȱ
theȱschemeȱencompassesȱaȱrespondentȇsȱAppointmentsȱClauseȱchallengeȱtoȱaȱ ŗŘȱ
presidingȱALJȱ—ȱleadsȱusȱtoȱconcludeȱthatȱtheȱappellantsȇȱlawsuitȱmustȱbeȱ ŗřȱ
dismissed.ȱȱTwoȱofȱourȱsisterȱcircuitsȱrecentlyȱreachedȱsimilarȱconclusions.ȱȱSeeȱ ŗ4ȱ
Jarkesyȱv.ȱSEC,ȱŲ03ȱF.3dȱųȱ(D.C.ȱCir.ȱ2015);ȱBeboȱv.ȱSEC,ȱűųųȱF.3dȱű65ȱ(űthȱCir.ȱ ŗśȱ
2015),ȱcert.ȱdenied,ȱ136ȱS.ȱCt.ȱ1500ȱ(2016).ȱȱWeȱagreeȱinȱlargeȱpartȱwithȱtheirȱ ŗŜȱ
reasoning.ȱ ŗ7ȱ
ȱ ŗ8ȱ

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ŗŘ

Iȱ ŗȱ
Asȱanȱinitialȱmatter,ȱtheȱtext,ȱstructure,ȱandȱpurposeȱofȱtheȱsecuritiesȱlawsȱ Řȱ
makeȱclearȱthatȱCongressȱintendedȱtheȱSECȇsȱschemeȱofȱadministrativeȱreviewȱtoȱ řȱ
permitȱtheȱCommissionȱtoȱbringȱitsȱexpertiseȱtoȱbearȱinȱenforcingȱtheȱsecuritiesȱ 4ȱ
laws.ȱȱTheȱschemeȱenablesȱtheȱSECȇsȱDivisionȱofȱEnforcementȱtoȱbringȱstatutoryȱ śȱ
chargesȱbeforeȱanȱadministrativeȱtribunalȱandȱaffordsȱrespondentsȱtheȱ Ŝȱ
opportunityȱtoȱgatherȱevidence,ȱpresentȱaȱdefense,ȱandȱappealȱanyȱadverseȱ 7ȱ
rulingsȱinȱfederalȱcourt.ȱȱInȱThunderȱBasin,ȱtheȱSupremeȱCourtȱheldȱthatȱaȱsimilarȱ 8ȱ
schemeȱprecludedȱfederalȱdistrictȱcourtȱjurisdictionȱoverȱchallengesȱtoȱanȱ 9ȱ
agencyȇsȱapplicationȱofȱaȱstatuteȱtoȱparticularȱfacts.ȱȱ510ȱU.S.ȱatȱ20ŲȬ0ų,ȱ216.ȱȱWeȱ ŗŖȱ
reachȱtheȱsameȱconclusionȱhere.ȱȱGenerally,ȱtherefore,ȱpersonsȱrespondingȱtoȱSECȱ ŗŗȱ
enforcementȱactionsȱareȱprecludedȱfromȱinitiatingȱlawsuitsȱinȱfederalȱcourtsȱasȱaȱ ŗŘȱ
meansȱtoȱdefendȱagainstȱthem.ȱȱSeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ16Ȭ1űȱ(analogizingȱtheȱ ŗřȱ
SECȇsȱstatutoryȱreviewȱschemeȱtoȱtheȱschemeȱatȱissueȱinȱThunderȱBasinȱandȱ ŗ4ȱ
concludingȱthatȱCongressȱintendedȱȈtoȱprecludeȱsuitsȱ[inȱfederalȱcourts]ȱbyȱ ŗśȱ
respondentsȱinȱSECȱadministrativeȱproceedingsȱinȱtheȱmineȬrunȱofȱcasesȈ).řȱ ŗŜȱ

řȱTheȱHillȱdecisionȱconcludedȱthatȱ“[t]hereȱcanȱbeȱnoȱȇfairlyȱdiscernibleȇȱCongressionalȱ
intentȱtoȱlimitȱjurisdictionȱawayȱfromȱdistrictȱcourtsȱwhenȱtheȱtextȱofȱtheȱstatuteȈȱ
permitsȱtheȱSECȱtoȱinitiateȱenforcementȱactionsȱinȱeitherȱȈdistrictȱcourtȱ[or]ȱ

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ŗř

IIȱ ŗȱ
Theȱappellantsȱdoȱnotȱcontestȱthatȱconclusion.ȱȱTheyȱimplicitlyȱ Řȱ
acknowledgeȱthatȱanȱSECȱadministrativeȱproceeding,ȱonceȱinitiated,ȱisȱtheȱ řȱ
exclusiveȱinitialȱforumȱforȱclaimsȱȈrequiringȱtheȱdevelopmentȱofȱaȱfactualȱrecord,ȱ 4ȱ
theȱexerciseȱofȱagencyȱdiscretion,ȱorȱtheȱapplicationȱofȱaȱstatuteȱtoȱparticularȱ śȱ
facts.ȈȱȱAppellantsȇȱBr.ȱatȱŮ.ȱȱTheyȱargue,ȱhowever,ȱthatȱtheirȱAppointmentsȱ Ŝȱ
Clauseȱchallengeȱisȱaȱdistinctȱtypeȱofȱclaim:ȱȈaȱthresholdȱconstitutionalȱchallengeȱ 7ȱ
toȱagencyȱpractice.ȈȱȱId.ȱatȱ12.ȱȱTheyȱassertȱthatȱthisȱtypeȱofȱclaimȱsatisfiesȱallȱthreeȱ 8ȱ
ofȱtheȱThunderȱBasinȱfactorsȱandȱsoȱfallsȱoutsideȱtheȱexclusiveȱpurviewȱofȱtheȱ 9ȱ
SECȇsȱadministrativeȱreviewȱscheme.ȱ ŗŖȱ
TheȱdistrictȱcourtȱheldȱthatȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱ ŗŗȱ
failedȱtoȱsatisfyȱatȱleastȱtwoȱofȱtheȱThunderȱBasinȱfactors:ȱȱItȱwouldȱbeȱsubjectȱtoȱ ŗŘȱ
meaningfulȱjudicialȱreviewȱwithinȱtheȱSECȇsȱadministrativeȱscheme,ȱandȱitȱwasȱ ŗřȱ
notȱȈwhollyȱcollateralȈȱtoȱtheȱscheme.ȱȱTilton,ȱ2015ȱWLȱŮ006165,ȱatȱ*ŮȬ12,ȱ2015ȱU.S.ȱ ŗ4ȱ

administrativeȱproceedings.ȈȱȱHill,ȱŗŗ4ȱF.ȱSupp.ȱřdȱatȱŗřŖŜ.ȱȱWeȱdisagree.ȱȱCongressȇsȱ
decisionȱtoȱvestȱtheȱSECȱwithȱaȱchoiceȱbetweenȱforumsȱdoesȱnotȱimplyȱthatȱtheȱchosenȱ
forumȱshouldȱnotȱbeȱexclusiveȱofȱtheȱother.ȱȱToȱtheȱcontraryȱ—ȱwithoutȱsuchȱexclusivity,ȱ
theȱSECȇsȱstatutoryȱpowerȱtoȱchooseȱwouldȱbeȱillusory.ȱȱSeeȱJarkesy,ȱ8ŖřȱF.řdȱatȱŗ7ȱ
(ȈCongressȱgrantedȱtheȱchoiceȱofȱforumȱtoȱtheȱCommission,ȱandȱthatȱauthorityȱcouldȱbeȱ
forȱnaughtȱifȱrespondentsȱ.ȱ.ȱ.ȱcouldȱcountermandȱtheȱCommissionȇsȱchoiceȱbyȱfilingȱaȱ
courtȱaction.Ȉ).ȱ

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ŗ4

Dist.ȱLEXISȱŲ5015,ȱatȱ*ųȬ3Ů.ȱȱTheȱdistrictȱcourtȱalsoȱsuggested,ȱbutȱdidȱnotȱdecide,ȱ ŗȱ
thatȱtheȱAppointmentsȱClauseȱclaimȱfailedȱtoȱsatisfyȱtheȱremainingȱThunderȱBasinȱ Řȱ
factorȱbecauseȱitȱdidȱnotȱfallȱoutsideȱtheȱSECȇsȱexpertise.ȱȱSeeȱid.ȱatȱ2015ȱWLȱ řȱ
Ů006165,ȱatȱ*12Ȭ13,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*3ŮȬ36.ȱȱDespiteȱleavingȱaȱ 4ȱ
decisionȱasȱtoȱthatȱfactorȱopen,ȱtheȱcourtȱconcludedȱthatȱCongressȱintendedȱtheȱ śȱ
SECȇsȱadministrativeȱreviewȱschemeȱtoȱencompassȱtheȱappellantsȇȱAppointmentsȱ Ŝȱ
Clauseȱclaim,ȱtoȱtheȱexclusionȱofȱfederalȱdistrictȱcourtȱjurisdiction.ȱȱ 7ȱ
Weȱagreeȱwithȱthatȱconclusion.ȱȱTheȱappellantsȇȱAppointmentsȱClauseȱ 8ȱ
claimȱwillȱbeȱsubjectȱtoȱmeaningfulȱjudicialȱreviewȱthroughȱadministrativeȱ 9ȱ
channels,ȱaȱfactȱthatȱweighsȱstronglyȱagainstȱdistrictȱcourtȱjurisdiction.ȱȱSeeȱBebo,ȱ ŗŖȱ
űųųȱF.3dȱatȱűűŮȬű5ȱ(characterizingȱtheȱavailabilityȱofȱmeaningfulȱjudicialȱreviewȱasȱ ŗŗȱ
theȱȈmostȱimportantȈȱThunderȱBasinȱfactor).ȱȱȱAndȱalthoughȱtheȱotherȱtwoȱThunderȱ ŗŘȱ
Basinȱfactorsȱpresentȱcloserȱquestionsȱinȱthisȱcase,ȱtheyȱdoȱnotȱpersuasivelyȱ ŗřȱ
demonstrateȱthatȱtheȱAppointmentsȱClauseȱclaimȱfallsȱoutsideȱtheȱscopeȱofȱtheȱ ŗ4ȱ
SECȇsȱoverarchingȱscheme.ȱ ŗśȱ
A.ȱ TheȱAvailabilityȱofȱMeaningfulȱJudicialȱReviewȱ ŗŜȱ
TurningȱinȱmoreȱdetailȱtoȱtheȱapplicationȱofȱtheȱThunderȱBasinȱfactors,ȱweȱ ŗ7ȱ
firstȱconsiderȱwhetherȱtheȱSECȇsȱadministrativeȱschemeȱassuresȱthatȱtheȱ ŗ8ȱ

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ŗś

appellantsȱhaveȱanȱopportunityȱforȱmeaningfulȱjudicialȱreviewȱofȱtheirȱ ŗȱ
AppointmentsȱClauseȱclaim.ȱȱTheȱappellantsȱdoȱnotȱdisputeȱthatȱtheȱschemeȱ Řȱ
offersȱsomeȱjudicialȱreview:ȱanȱappealȱtoȱaȱfederalȱcircuitȱcourtȱfromȱanȱadverseȱ řȱ
rulingȱbyȱtheȱCommission.ȱȱTheyȱargue,ȱhowever,ȱthatȱsuchȱreviewȱwouldȱnotȱbeȱ 4ȱ
ȈmeaningfulȈȱbecauseȱitȱcouldȱnotȱprovideȱanȱadequateȱremedyȱforȱtheȱSECȇsȱ śȱ
allegedȱviolationȱofȱtheȱAppointmentsȱClause.ȱȱThatȱisȱso,ȱinȱtheȱappellantsȇȱview,ȱ Ŝȱ
becauseȱtheirȱexposureȱtoȱtheȱongoingȱproceedingȱ—ȱasȱdistinctȱfromȱanyȱadverseȱ 7ȱ
rulingȱthatȱmightȱresultȱ—ȱwouldȱitselfȱconstituteȱaȱgraveȱconstitutionalȱinjuryȱ 8ȱ
thatȱcouldȱnotȱbeȱredressedȱafterȱtheȱfact.ȱȱAsȱprecedentialȱsupportȱforȱtheirȱ 9ȱ
position,ȱtheȱappellantsȱciteȱtheȱSupremeȱCourtȇsȱdecisionȱinȱFreeȱEnterpriseȱandȱ ŗŖȱ
ourȱdecadesȬoldȱdecisionȱinȱToucheȱRossȱ&ȱCo.ȱv.ȱSEC,ȱ60ųȱF.2dȱ5ű0ȱ(2dȱCir.ȱ1ųűų).ȱ ŗŗȱ
Theȱappellantsȇȱargumentȱisȱnotȱwithoutȱforce,ȱasȱdemonstratedȱbyȱitsȱ ŗŘȱ
successȱinȱseveralȱdistrictȱcourts.ȱȱSeeȱHill,ȱ2015ȱWLȱŮ30ű0ŲŲ,ȱatȱ*6ȬŲ,ȱ2015ȱU.S.ȱ ŗřȱ
Dist.ȱLEXISȱűŮŲ22,ȱatȱ*1űȬ1ų;ȱDuka,ȱ103ȱF.ȱSupp.ȱ3dȱ3Ų2,ȱ3ų0Ȭų1.ȱȱUltimately,ȱ ŗ4ȱ
however,ȱweȱareȱnotȱconvinced.ȱȱInȱourȱview,ȱtheȱappellantsȇȱargumentȱ ŗśȱ
misconstruesȱbothȱFreeȱEnterpriseȱandȱToucheȱRossȱandȱisȱatȱoddsȱwithȱtheȱ ŗŜȱ
establishedȱapproachȱtoȱanalogousȱjurisdictionalȱdisputesȱinȱfederalȱcourts.ȱ ŗ7ȱ
ȱ ŗ8ȱ

-- 15 of 65 --

ŗŜ

i. FreeȱEnterpriseȱ ŗȱ
FreeȱEnterpriseȱdealtȱwithȱtheȱPublicȱCompanyȱAccountingȱOversightȱBoardȱ Řȱ
(theȱȈPCAOBȈ),ȱanȱentityȱcreatedȱunderȱtheȱSarbanesȬOxleyȱActȱofȱ2002,ȱPub.ȱL.ȱ řȱ
No.ȱ10űȬ20Ů,ȱ116ȱStat.ȱűŮ5,ȱtoȱsuperviseȱtheȱpracticesȱofȱaccountingȱfirms.ȱȱTheȱ 4ȱ
PCAOBȇsȱfiveȱmembersȱwereȱtoȱbeȱappointedȱbyȱtheȱSEC,ȱandȱsomeȱ—ȱbutȱnotȱ śȱ
allȱ—ȱofȱtheȱPCAOBȇsȱregulatoryȱactionsȱrequiredȱSECȱapprovalȱinȱtheȱformȱofȱaȱ Ŝȱ
finalȱCommissionȱorder.ȱȱTheȱSarbanesȬOxleyȱAct,ȱlikeȱtheȱInvestmentȱAdvisersȱ 7ȱ
Actȱbeforeȱit,ȱpermittedȱlosingȱpartiesȱtoȱappealȱfromȱanȱadverseȱfinalȱorderȱtoȱaȱ 8ȱ
federalȱcourtȱofȱappeals.ȱȱTheȱstatuteȱmadeȱnoȱprovision,ȱhowever,ȱforȱfederalȱ 9ȱ
reviewȱofȱBoardȱactionsȱthatȱdidȱnotȱrequireȱSECȱapproval.ȱȱSeeȱFreeȱEnterprise,ȱ ŗŖȱ
561ȱU.S.ȱatȱŮŲųȬų0.ȱ ŗŗȱ
InȱtheȱFreeȱEnterpriseȱcase,ȱtheȱPCAOBȱhad,ȱinȱtheȱcourseȱofȱitsȱsupervisoryȱ ŗŘȱ
work,ȱȈinspectedȱ[aȱparticularȱaccounting]ȱfirm,ȱreleasedȱaȱreportȱcriticalȱofȱitsȱ ŗřȱ
auditingȱprocedures,ȱandȱ[begun]ȱaȱformalȱinvestigation.ȈȱȱId.ȱatȱŮŲű.ȱȱThoseȱ ŗ4ȱ
actionsȱwereȱnotȱsubjectȱtoȱreviewȱbyȱtheȱSECȱorȱapprovalȱbyȱfinalȱCommissionȱ ŗśȱ
order,ȱandȱsoȱdidȱnotȱgiveȱriseȱtoȱanȱadministrativeȱrouteȱtoȱfederalȱreview.ȱȱId.ȱatȱ ŗŜȱ
ŮŲųȬų0.ȱȱTheȱaccountingȱfirmȱthenȱfiledȱaȱlawsuitȱinȱfederalȱdistrictȱcourtȱthatȱ ŗ7ȱ
soughtȱtoȱvoidȱtheȱPCAOBȇsȱactionsȱonȱArticleȱIIȱgrounds.ȱȱTheȱfirmȱargued,ȱasȱ ŗ8ȱ

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ŗ7

theȱappellantsȱdoȱhere,ȱthatȱtheȱSECȱhadȱviolatedȱtheȱAppointmentsȱClauseȱwhenȱ ŗȱ
itȱselectedȱtheȱmembersȱofȱtheȱPCAOB,ȱrenderingȱtheirȱappointmentsȱ Řȱ
constitutionallyȱinfirm.ȱȱId.ȱatȱŮŲűȬŲŲ.ȱ řȱ
TheȱSupremeȱCourtȱheldȱthatȱtheȱdistrictȱcourtȱcouldȱexerciseȱjurisdictionȱ 4ȱ
overȱtheȱaccountingȱfirmȇsȱlawsuit,ȱdespiteȱtheȱavailabilityȱofȱadministrativeȱ śȱ
reviewȱregardingȱsomeȱotherȱPCAOBȱactions.ȱȱId.ȱatȱŮų0Ȭų1.ȱȱTheȱCourtȱreasoned,ȱ Ŝȱ
inȱpart,ȱthatȱtheȱadministrativeȱreviewȱschemeȱfailedȱtoȱmakeȱanyȱformȱofȱjudicialȱ 7ȱ
reviewȱmeaningfullyȱaccessibleȱtoȱtheȱfirm.ȱȱBecauseȱtheȱPCAOBȇsȱregulatoryȱ 8ȱ
actionsȱhadȱnotȱproducedȱaȱreviewableȱCommissionȱorder,ȱtheȱaccountingȱfirmȱ 9ȱ
couldȱhaveȱraisedȱitsȱconstitutionalȱobjectionȱinȱfederalȱcourtȱthroughȱ ŗŖȱ
administrativeȱchannelsȱonlyȱbyȱmanufacturingȱaȱnew,ȱtangentialȱdisputeȱthatȱ ŗŗȱ
wouldȱrequireȱaȱCommissionȱorder,ȱandȱthenȱusingȱthatȱdisputeȱasȱaȱvehicleȱforȱ ŗŘȱ
itsȱArticleȱIIȱclaims.ȱȱTheȱCourtȱdeemedȱthatȱcircuitousȱoptionȱinadequate,ȱandȱsoȱ ŗřȱ
concludedȱthatȱmeaningfulȱjudicialȱreviewȱwasȱnotȱotherwiseȱavailableȱtoȱtheȱ ŗ4ȱ
accountingȱfirm.ȱȱId.ȱatȱŮų0.ȱ ŗśȱ
TheȱappellantsȱreadȱFreeȱEnterpriseȱtoȱsuggestȱthatȱjudicialȱreviewȱofȱanȱ ŗŜȱ
ArticleȱIIȱchallengeȱtoȱanȱadministrativeȱtribunalȱisȱnotȱmeaningfulȱifȱconductedȱ ŗ7ȱ
afterȱtheȱtribunalȇsȱproceedingȱconcludes,ȱbecauseȱofȱtheȱinherentȱremedialȱ ŗ8ȱ

-- 17 of 65 --

ŗ8

limitationsȱofȱpostȬproceedingȱreview.ȱȱSeeȱAppellantsȇȱBr.ȱatȱ13,ȱ1űȬ1Ų.ȱȱWeȱ ŗȱ
disagree.ȱȱTheȱFreeȱEnterpriseȱCourtȇsȱanalysisȱturnedȱonȱtheȱaccessibilityȱofȱpostȬ Řȱ
proceedingȱreviewȱbyȱaȱfederalȱcourtȱofȱappealsȱ—ȱnotȱonȱwhetherȱsuchȱreview,ȱ řȱ
ifȱaccessible,ȱcouldȱadequatelyȱremedyȱtheȱPCAOBȇsȱallegedȱviolationȱofȱArticleȱ 4ȱ
II.ȱȱFreeȱEnterpriseȱthereforeȱlendsȱnoȱsupportȱtoȱtheȱappellantsȇȱcharacterizationȱofȱ śȱ
theirȱprospectiveȱconstitutionalȱinjuryȱasȱirremediableȱafterȱtheȱconclusionȱofȱ Ŝȱ
theirȱadministrativeȱproceeding.ȱ 7ȱ
ii. ToucheȱRossȱ 8ȱ
TheȱappellantsȇȱrelianceȱonȱToucheȱRossȱisȱsimilarlyȱunavailing.ȱȱThere,ȱtheȱ 9ȱ
SECȱtookȱstepsȱtoȱinstituteȱanȱadministrativeȱproceedingȱagainstȱanȱaccountingȱ ŗŖȱ
firmȱandȱseveralȱofȱitsȱpartnersȱ(collectively,ȱȈToucheȱRossȈ)ȱunderȱRuleȱ2(e)ȱofȱ ŗŗȱ
theȱCommissionȇsȱRulesȱofȱPractice,ȱwhichȱrelatedȱtoȱtheȱsuspensionȱandȱ ŗŘȱ
disbarmentȱofȱpersonsȱpracticingȱbeforeȱtheȱCommissioner.ȱȱToucheȱRossȱ ŗřȱ
immediatelyȱfiledȱaȱlawsuitȱinȱfederalȱcourtȱseekingȱtoȱenjoinȱtheȱproceedingȱonȱ ŗ4ȱ
theȱgroundȱthatȱRuleȱ2(e)ȱwasȱnotȱauthorizedȱbyȱstatute.ȱȱȱ ŗśȱ
Theȱdistrictȱcourtȱdeclinedȱtoȱexerciseȱjurisdiction.ȱȱItȱreasoned,ȱinȱpart,ȱthatȱ ŗŜȱ
theȱplannedȱadministrativeȱproceedingȱwouldȱnotȱirreparablyȱharmȱToucheȱRoss,ȱ ŗ7ȱ
whichȱmeantȱthatȱToucheȱRossȱwasȱrequiredȱtoȱexhaustȱtheȱadministrativeȱ ŗ8ȱ

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ŗ9

reviewȱprocessȱbeforeȱraisingȱitsȱclaimsȱinȱfederalȱcourt.ȱȱSeeȱTouche,ȱRossȱ&ȱCo.ȱv.ȱ ŗȱ
SEC,ȱNo.ȱű6ȬCVȬŮŮŲų,ȱ1ųűŲȱWLȱ10ŲŮ,ȱatȱ*ŮȬ5,ȱűȬų,ȱ1ųűŲȱU.S.ȱDist.ȱLEXISȱ1űųűŮ,ȱ*ųȬ Řȱ
12,ȱ1ŲȬ1ų,ȱ23ȱ(S.D.N.Y.ȱApr.ȱ2Ů,ȱ1ųűŲ),ȱaffȇdȱsubȱnom.ȱToucheȱRossȱ&ȱCo.ȱv.ȱSEC,ȱ60ųȱ řȱ
F.2dȱ5ű0ȱ(2dȱCir.ȱ1ųűų).ȱ 4ȱ
Onȱappeal,ȱthisȱCourtȱrecognizedȱdistrictȱcourtȱjurisdictionȱoverȱToucheȱ śȱ
Rossȇsȱlawsuit.ȱȱTheȱpanelȱacknowledgedȱthatȱfederalȱchallengesȱtoȱ Ŝȱ
administrativeȱproceedingsȱatȱȈintermediateȱstagesȈȱareȱgenerallyȱdisfavored,ȱ 7ȱ
particularlyȱwhereȱ—ȱasȱinȱtheȱcaseȱbeforeȱitȱ—ȱtheȱagencyȱhadȱnotȱactedȱȈplainlyȱ 8ȱ
beyondȱitsȱjurisdiction.ȈȱȱToucheȱRoss,ȱ60ųȱF.2dȱatȱ5ű6.ȱȱNonetheless,ȱtheȱCourtȱ 9ȱ
permittedȱToucheȱRossȇsȱlawsuitȱtoȱproceedȱonȱtheȱgroundȱthatȱitsȱconstitutionalȱ ŗŖȱ
claimȱwouldȱnotȱbenefitȱfromȱtheȱSECȇsȱȈexpertise,ȈȱȈdiscretionȈȱorȱfactfinding,ȱ ŗŗȱ
andȱwasȱthusȱalreadyȱripeȱforȱfederalȱadjudication.ȱȱId.ȱatȱ5űű.ȱ ŗŘȱ
TheȱCourtȇsȱdecisionȱdidȱnotȱsuggestȱthatȱaȱfederalȱcourtȱwouldȱbeȱunableȱ ŗřȱ
toȱvindicateȱToucheȱRossȇsȱchallengeȱtoȱRuleȱ2(e)ȱafterȱtheȱSECȇsȱproceedingȱ ŗ4ȱ
concluded.4ȱȱItȱheldȱonlyȱthatȱthereȱwasȱnoȱcompellingȱreasonȱforȱToucheȱRossȱtoȱ ŗśȱ
waitȱforȱpostȬproceedingȱreviewȱbecauseȱtheȱadministrativeȱtribunalȱwouldȱnotȱ ŗŜȱ

4ȱIndeed,ȱinȱaȱconcurringȱopinion,ȱtwoȱmembersȱofȱtheȱpanelȱexpressedȱtheirȱ
confidenceȱinȱtheȱcapacityȱofȱpostȬproceedingȱjudicialȱreviewȱtoȱȈcorrectȱtheȱoccasionalȱ
excessesȱandȱerrorsȱthatȱareȱanȱinevitableȱpartȱofȱtheȱadministrativeȱprocess.ȈȱȱToucheȱ
Ross,ȱŜŖ9ȱF.Řdȱatȱś8řȱ(Kaufman,ȱC.J.,ȱconcurring).ȱ

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bringȱitsȱexpertiseȱtoȱbearȱinȱaȱwayȱthatȱwouldȱaidȱaȱfederalȱcourtȇsȱeventualȱ ŗȱ
adjudication.ȱȱThatȱpropositionȱdoesȱnotȱsupportȱtheȱappellantsȇȱcontentionȱhereȱ Řȱ
thatȱpostȬproceedingȱjudicialȱreviewȱofȱtheirȱAppointmentsȱClauseȱchallengeȱwillȱ řȱ
notȱbeȱmeaningful.ȱȱRather,ȱToucheȱRossȱresonatesȱwithȱaȱdifferentȱThunderȱBasinȱ 4ȱ
factor:ȱȱwhetherȱaȱclaimȱfallsȱoutsideȱanȱagencyȇsȱexpertise.ȱȱAndȱitsȱreasoningȱonȱ śȱ
thatȱissueȱisȱnoȱlongerȱconsideredȱsound,ȱasȱweȱexplainȱbelow.ȱ Ŝȱ
iii. ConflictȱwithȱEstablishedȱPracticeȱRegardingȱAnalogousȱ 7ȱ
ChallengesȱtoȱaȱTribunalȇsȱConstitutionalȱLegitimacyȱ 8ȱ
ȱ 9ȱ
TheȱappellantsȇȱargumentȱthatȱpostȬproceedingȱjudicialȱreviewȱofȱtheirȱ ŗŖȱ
AppointmentsȱClauseȱclaimȱwillȱbeȱmeaninglessȱisȱnotȱmerelyȱunsupportedȱbyȱ ŗŗȱ
FreeȱEnterpriseȱandȱToucheȱRoss;ȱitȱisȱalsoȱatȱoddsȱwithȱestablishedȱpracticeȱinȱ ŗŘȱ
federalȱcourtȱregardingȱanalogousȱchallengesȱtoȱaȱtribunalȇsȱconstitutionalȱ ŗřȱ
legitimacy.ȱȱAsȱtheȱdistrictȱcourtȱexplained,ȱlitigantsȱwhoȱunsuccessfullyȱ ŗ4ȱ
challengeȱtheȱauthorityȱofȱaȱpresidingȱjudgeȱorȱjuryȱtoȱdecideȱaȱcaseȱoftenȱmustȱ ŗśȱ
waitȱtoȱappealȱtheȱissueȱuntilȱafterȱtheȱcourtȱrendersȱaȱfinalȱjudgment.ȱȱSee,ȱe.g.,ȱ ŗŜȱ
Germainȱv.ȱConnecticutȱNatȇlȱBank,ȱų30ȱF.2dȱ103Ų,ȱ10Ů0ȱ(2dȱCir.ȱ1ųų1)ȱ(concludingȱ ŗ7ȱ
thatȱaȱdefendantȱwhoȱunsuccessfullyȱchallengedȱtheȱplaintiffȇsȱrightȱtoȱjuryȱtrialȱ ŗ8ȱ
mustȱawaitȱtheȱjuryȇsȱverdictȱbeforeȱappealing);ȱDȇIppolitoȱv.ȱAm.ȱOilȱCo.,ȱŮ01ȱF.2dȱ ŗ9ȱ
ű6Ů,ȱű6ŮȬ65ȱ(2dȱCir.ȱ1ų6Ų)ȱ(perȱcuriam)ȱ(decidingȱthatȱaȱdefendantȱwhoȱ ŘŖȱ

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unsuccessfullyȱchallengedȱtheȱtransferȱofȱhisȱcaseȱtoȱanotherȱdistrictȱmustȱawaitȱ ŗȱ
theȱotherȱdistrictȱcourtȇsȱȈfinalȱjudgmentȈȱbeforeȱappealing);ȱseeȱalsoȱInȱreȱalȬ Řȱ
Nashiri,ȱűų1ȱF.3dȱű1,ȱű5,ȱŲ0ȱ(D.C.ȱCir.ȱ2015)ȱ(concluding,ȱinȱdenyingȱaȱpetitionȱforȱ řȱ
writȱofȱmandamus,ȱthatȱaȱdefendantȱwhoȱunsuccessfullyȱraisedȱanȱAppointmentsȱ 4ȱ
ClauseȱchallengeȱtoȱtwoȱofȱtheȱUnitedȱStatesȱCourtȱofȱMilitaryȱCommissionȱ śȱ
Reviewȇsȱpresidingȱjudgesȱmustȱawaitȱtheȱjudgesȇȱrulingȱbeforeȱappealingȱinȱ Ŝȱ
federalȱcourt).ȱȱLikeȱtheȱappellantsȱhere,ȱaȱlitigantȱinȱthisȱkindȱofȱcaseȱmustȱ 7ȱ
expendȱfinancialȱandȱemotionalȱresourcesȱtoȱcompleteȱaȱproceedingȱthatȱmayȱ 8ȱ
ultimatelyȱproveȱconstitutionallyȱinfirm.śȱȱSubsequentȱjudicialȱreviewȱcannotȱ 9ȱ
restoreȱthoseȱresources,ȱbutȱitȱcanȱvacateȱtheȱresultingȱjudgmentȱandȱremandȱforȱ ŗŖȱ
aȱnewȱproceeding.ȱȱThatȱpostȬproceedingȱrelief,ȱalthoughȱimperfect,ȱsufficesȱtoȱ ŗŗȱ
vindicateȱtheȱlitigantȇsȱconstitutionalȱclaim.ȱȱSeeȱGermain,ȱų30ȱF.2dȱatȱ10Ů0ȱ ŗŘȱ
(explainingȱthatȱifȱaȱjuryȱtrialȱwereȱinȱfactȱimproper,ȱanȱappellateȱcourtȱcouldȱ ŗřȱ
Ȉremandȱforȱaȱnonjuryȱtrial,ȱthusȱvindicatingȱtheȱ[objectingȱdefendantȇs]ȱrightȈ);ȱ ŗ4ȱ
seeȱalsoȱInȱreȱalȬNashiri,ȱűų1ȱF.3dȱatȱŲ0ȱ(ȈVacaturȱ[premisedȱonȱtheȱdefendantȇsȱ ŗśȱ
AppointmentȱClauseȱclaim],ȱevenȱatȱtheȱappealȬfromȬfinalȬjudgmentȱstage,ȱ ŗŜȱ

śȱȱȱCf.ȱLearnedȱHand,ȱTheȱDeficienciesȱofȱTrialsȱToȱReachȱtheȱHeartȱofȱtheȱMatter,ȱ
řȱAssociationȱofȱtheȱBarȱofȱtheȱCityȱofȱNewȱYork,ȱLecturesȱonȱLegalȱTopicsȱ89,ȱŗŖśȱ(ŗ9ŘŜ)ȱ
(musingȱthatȱbecomingȱaȱpartyȱtoȱaȱlawsuitȱshouldȱbeȱȈdread[ed]ȱ.ȱ.ȱ.ȱbeyondȱalmostȱ
anythingȱelseȱshortȱofȱsicknessȱandȱdeathȈ).ȱ

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wouldȱfullyȱvindicateȱ[theȱdefendantȇs]ȱrightsȱandȱtheȱPresidentȇsȱandȱtheȱ ŗȱ
Senateȇsȱconstitutionalȱpowers.Ȉȱ(internalȱquotationȱmarksȱandȱalterationsȱ Řȱ
omitted)).ȱȱTheȱlitigantȇsȱfinancialȱandȱemotionalȱcostsȱinȱlitigatingȱtheȱinitialȱ řȱ
proceedingȱareȱsimplyȱtheȱpriceȱofȱparticipatingȱinȱtheȱAmericanȱlegalȱsystem,ȱ 4ȱ
andȱnotȱanȱirreparableȱinjuryȱthatȱnecessitatesȱinterlocutoryȱreviewȱofȱtheȱinitialȱ śȱ
courtȇsȱjurisdiction.ȱ Ŝȱ
TheȱSupremeȱCourtȱappliedȱthisȱprincipleȱtoȱfactsȱsimilarȱtoȱthoseȱ 7ȱ
presentedȱtoȱusȱhereȱinȱFTCȱv.ȱStandardȱOilȱCo.ȱofȱCalifornia,ȱŮŮųȱU.S.ȱ232ȱ(1ųŲ0).ȱȱ 8ȱ
There,ȱanȱoilȱcompanyȱbroughtȱsuitȱinȱfederalȱdistrictȱcourtȱtoȱenjoinȱanȱongoingȱ 9ȱ
administrativeȱproceedingȱconductedȱbyȱtheȱFederalȱTradeȱCommissionȱ(ȈFTCȈ),ȱ ŗŖȱ
contendingȱthatȱtheȱproceedingȱasȱaȱwholeȱwasȱunlawfulȱbecauseȱtheȱFTCȱhadȱ ŗŗȱ
initiatedȱitȱwithoutȱtheȱrequisiteȱevidentiaryȱbasis.ȱȱId.ȱatȱ235.ȱȱAsȱaȱgeneralȱ ŗŘȱ
matter,ȱaȱrespondentȱinȱthisȱtypeȱofȱproceedingȱmustȱexhaustȱitsȱadministrativeȱ ŗřȱ
remediesȱbeforeȱfilingȱaȱrelatedȱactionȱinȱfederalȱcourt,ȱunlessȱtheȱrespondentȱ ŗ4ȱ
wouldȱsufferȱirreparableȱinjuryȱfromȱtheȱdelay.ȱȱSeeȱRenegotiationȱBd.ȱv.ȱ ŗśȱ
BannercraftȱClothingȱCo.,ȱŮ15ȱU.S.ȱ1,ȱ2Ůȱ(1ųűŮ).ȱȱTheȱoilȱcompanyȱarguedȱthatȱitȱhadȱ ŗŜȱ
exhaustedȱallȱrelevantȱremediesȱbeforeȱfilingȱitsȱfederalȱlawsuit.ȱȱStandardȱOil,ȱŮŮųȱ ŗ7ȱ
U.S.ȱatȱ2Ů3.ȱȱInȱtheȱalternative,ȱhowever,ȱtheȱcompanyȱcontendedȱthatȱanyȱfailureȱ ŗ8ȱ

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toȱexhaustȱshouldȱbeȱexcusedȱbecauseȱtheȱcompanyȱwouldȱsufferȱirreparableȱ ŗȱ
injuryȱinȱtheȱformȱofȱȈexpenseȱandȱdisruptionȈȱifȱitȱwereȱcompelledȱtoȱcompleteȱ Řȱ
theȱadministrativeȱproceedingȱbeforeȱreachingȱfederalȱcourt.ȱȱId.ȱatȱ2ŮŮ.ȱȱThatȱ řȱ
argumentȱcloselyȱresemblesȱtheȱappellantsȇȱclaimȱhereȱthatȱpostȬproceedingȱ 4ȱ
judicialȱreviewȱwillȱbeȱpowerlessȱtoȱremedyȱtheȱinjuryȱtheyȱwillȱsufferȱbyȱ śȱ
enduringȱtheȱSECȇsȱadministrativeȱadjudication.ȱ Ŝȱ
TheȱSupremeȱCourtȱconcludedȱthatȱaȱfederalȱcourtȱwouldȱbeȱableȱtoȱ 7ȱ
meaningfullyȱreviewȱtheȱoilȱcompanyȇsȱclaimȱafterȱtheȱadministrativeȱproceedingȱ 8ȱ
ended,ȱandȱthereforeȱorderedȱtheȱcompanyȇsȱlawsuitȱdismissedȱonȱjurisdictionalȱ 9ȱ
grounds.ȱȱTheȱCourtȱacknowledgedȱthatȱtheȱcompanyȱwouldȱendureȱ ŗŖȱ
ȈsubstantialȈȱexpenseȱandȱdisruptionȱbeforeȱtheȱadministrativeȱproceedingȱ ŗŗȱ
concluded.ȱȱId.ȱȱButȱitȱdeemedȱthatȱhardshipȱtoȱbeȱȈpartȱofȱtheȱsocialȱburdenȱofȱ ŗŘȱ
livingȱunderȱgovernment,Ȉȱratherȱthanȱaȱformȱofȱirreparableȱinjuryȱjustifyingȱ ŗřȱ
immediateȱjudicialȱreview.ȱȱId.ȱatȱ2ŮŮȬŮ5.ȱȱAsȱtheȱD.C.ȱCircuitȱsubsequentlyȱ ŗ4ȱ
explained,ȱwhereȱȈtheȱȇinjuryȇȱinflictedȱonȱtheȱpartyȱseekingȱreviewȱisȱtheȱburdenȱ ŗśȱ
ofȱgoingȱthroughȱanȱagencyȱproceeding,ȈȱtheȱSupremeȱCourtȇsȱdecisionȱinȱ ŗŜȱ
StandardȱOilȱȈteachesȱthatȱtheȱpartyȱmustȱpatientlyȱawaitȱtheȱdenouementȱofȱ ŗ7ȱ

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proceedingsȱwithinȱtheȱArticleȱIIȱbranch.ȈȱȱUSAAȱFed.ȱSav.ȱBankȱv.ȱMcLaughlin,ȱ ŗȱ
ŲŮųȱF.2dȱ1505,ȱ1510ȱ(D.C.ȱCir.ȱ1ųŲŲ).ȱ Řȱ
Inȱotherȱdecisions,ȱtheȱSupremeȱCourtȱhasȱconcludedȱthatȱpostȬproceedingȱ řȱ
judicialȱreviewȱwouldȱnotȱbeȱmeaningfulȱbecauseȱtheȱproceedingȱitselfȱposedȱaȱ 4ȱ
riskȱofȱsomeȱadditionalȱandȱirremediableȱharmȱbeyondȱtheȱburdensȱassociatedȱ śȱ
withȱtheȱdisputeȱresolutionȱprocess.ȱȱSee,ȱe.g.,ȱMcNaryȱv.ȱHaitianȱRefugeeȱCtr.,ȱInc.,ȱ Ŝȱ
ŮųŲȱU.S.ȱŮűų,ȱŮų6Ȭųű,ȱŮųųȱ(1ųų1)ȱ(permittingȱaȱclassȱofȱundocumentedȱaliensȱtoȱ 7ȱ
raiseȱaȱdueȬprocessȱchallengeȱtoȱINSȱproceedingsȱinȱdistrictȱcourt,ȱratherȱthanȱ 8ȱ
pursueȱeventualȱreviewȱinȱaȱfederalȱcourtȱofȱappealsȱthroughȱadministrativeȱ 9ȱ
channels,ȱpartlyȱbecauseȱmostȱofȱtheȱaliensȱcouldȱȈensureȱthemselvesȱreviewȱinȱ ŗŖȱ
courtsȱofȱappealsȱonlyȱifȱtheyȱvoluntarilyȱsurrender[ed]ȱthemselvesȱforȱ ŗŗȱ
deportation,ȈȱaȱȈpriceȱ.ȱ.ȱ.ȱtantamountȱtoȱaȱcompleteȱdenialȱofȱjudicialȱreviewȱforȱ ŗŘȱ
mostȱundocumentedȱaliensȈ).ȱȱButȱtheȱappellantsȱhaveȱidentifiedȱnoȱsuchȱ ŗřȱ
additional,ȱirremediableȱharmȱhere.ȱȱTheȱonlyȱprospectiveȱinjuryȱthatȱtheyȱ ŗ4ȱ
describeȱisȱȈbeingȱsubjectedȱtoȱanȱunconstitutionalȱadjudicativeȱprocedure,Ȉȱwithȱ ŗśȱ
theȱattendantȱȈembarrassment,ȱexpense,ȱȱ.ȱ.ȱ.ȱordealȱ.ȱ.ȱ.ȱ[and]ȱstateȱofȱanxietyȱandȱ ŗŜȱ
insecurity.ȈȱȱAppellantsȇȱBr.ȱatȱ1ų,ȱ21ȱ(alterationsȱinȱoriginalȱandȱinternalȱ ŗ7ȱ
quotationȱmarksȱomitted).ȱȱAsȱStandardȱOilȱandȱotherȱdecisionsȱdiscussedȱaboveȱ ŗ8ȱ

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indicate,ȱtheȱprospectȱofȱsuchȱharmȱaloneȱdoesȱnotȱrenderȱpostȬproceedingȱ ŗȱ
judicialȱreviewȱlessȱthanȱmeaningful.ȱȱCf.ȱInȱreȱalȬNashiri,ȱűų1ȱF.3dȱatȱűųȬŲ0ȱ Řȱ
(explainingȱthatȱtheȱdefendantȇsȱȈabstractȱconcernȈȱthatȱhisȱpresidingȱjudgesȱ řȱ
violatedȱȈtheȱseparationȱofȱpowersȈȱbecauseȱtheyȱhadȱbeenȱimproperlyȱappointedȱ 4ȱ
didȱnotȱestablishȱaȱprospectiveȱirreparableȱinjuryȱthatȱjustifiedȱimmediateȱfederalȱ śȱ
interventionȱinȱongoingȱadministrativeȱproceedings).ȱ Ŝȱ
Weȱthereforeȱconcludeȱthatȱtheȱappellantsȱwillȱhaveȱaccessȱtoȱmeaningfulȱ 7ȱ
judicialȱreviewȱofȱtheirȱAppointmentsȱClauseȱclaimȱthroughȱadministrativeȱ 8ȱ
channels.ȱȱSeeȱBebo,ȱűųųȱF.3dȱatȱűűŮȱ(concludingȱthatȱaȱrespondentȱinȱanȱongoingȱ 9ȱ
SECȱadministrativeȱproceedingȱcouldȱobtainȱmeaningfulȱjudicialȱreviewȱȈ[a]fterȱ ŗŖȱ
theȱpendingȱenforcementȱactionȱhasȱrunȱitsȱcourseȈȱbyȱȈrais[ing]ȱherȱobjections,Ȉȱ ŗŗȱ
includingȱanȱArticleȱIIȱchallengeȱtoȱtheȱpresidingȱALJ,ȱȈinȱaȱcircuitȱcourtȱofȱ ŗŘȱ
appealsȱestablishedȱunderȱArticleȱIIIȈ);ȱseeȱalsoȱJarkesy,ȱŲ03ȱF.3dȱatȱ2űȱ(ȈEvenȱ ŗřȱ
assumingȱ[theȱrespondent]ȱisȱrightȱthatȱCongressȱhasȱunconstitutionallyȱ ŗ4ȱ
delegatedȱpowerȱtoȱtheȱSECȱtoȱdecideȱwhetherȱtoȱplaceȱhimȱinȱanȱadministrativeȱ ŗśȱ
proceedingȱratherȱthanȱinȱaȱcourtȱaction,ȱ[theȱrespondent]ȱhasȱnoȱinherentȱrightȱtoȱ ŗŜȱ
avoidȱanȱadministrativeȱproceedingȱatȱall.ȱȱThus,ȱhisȱrightsȱcanȱbeȱvindicatedȱbyȱaȱ ŗ7ȱ

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reversalȱofȱtheȱCommissionȇsȱfinalȱorderȱifȱtheȱcourtȱofȱappealsȱgrantsȱhisȱpetitionȱ ŗȱ
forȱreview.Ȉȱ(internalȱquotationȱmarksȱomitted)).ȱ Řȱ
B.ȱ WhollyȱCollateralȱ řȱ
WeȱnextȱconsiderȱwhetherȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱ 4ȱ
ȈwhollyȱcollateralȈȱtoȱtheȱSECȇsȱadministrativeȱscheme.ȱȱTheȱSupremeȱCourtȱhasȱ śȱ
notȱexplainedȱpreciselyȱhowȱtoȱmakeȱthisȱdetermination,ȱalthoughȱElginȱsuggestsȱ Ŝȱ
thatȱaȱclaimȱisȱnotȱwhollyȱcollateralȱifȱitȱservesȱasȱtheȱȈvehicleȱbyȱwhichȈȱaȱpartyȱ 7ȱ
seeksȱtoȱprevailȱinȱanȱadministrativeȱproceeding.ȱȱSeeȱ132ȱS.ȱCt.ȱatȱ213ųȬŮ0.ȱȱInȱtheȱ 8ȱ
absenceȱofȱmoreȱextensiveȱguidance,ȱlowerȱcourtsȱhaveȱadoptedȱtwoȱcompetingȱ 9ȱ
approaches.ȱȱSomeȱdecisionsȱhaveȱsuggestedȱthatȱaȱclaimȱisȱnotȱwhollyȱcollateralȱ ŗŖȱ
toȱanȱadministrativeȱproceedingȱonlyȱifȱitȱisȱsubstantivelyȱintertwinedȱwithȱtheȱ ŗŗȱ
meritsȱdisputeȱthatȱtheȱproceedingȱwasȱcommencedȱtoȱresolve.ȱȱSeeȱHill,ȱ11ŮȱF.ȱ ŗŘȱ
Supp.ȱ3dȱatȱ130ųȱ(concludingȱthatȱtheȱrespondentȇsȱArticleȱIIȱchallengeȱwasȱ ŗřȱ
ȈwhollyȱcollateralȈȱtoȱtheȱongoingȱadministrativeȱproceedingȱbecauseȱȈ[w]hatȱ ŗ4ȱ
occursȱatȱtheȱ.ȱ.ȱ.ȱproceedingȱandȱtheȱSECȇsȱconductȱthereȱisȱirrelevantȱtoȈȱtheȱ ŗśȱ
constitutionalȱchallenge);ȱDuka,ȱ103ȱF.ȱSupp.ȱ3dȱatȱ3ų1ȱ(concludingȱthatȱtheȱ ŗŜȱ
respondentȇsȱArticleȱIIȱchallengeȱwasȱȈwhollyȱcollateralȈȱtoȱtheȱongoingȱ ŗ7ȱ
administrativeȱproceedingȱbecauseȱtheȱchallengeȱdidȱnotȱȈattackȱanyȱorderȱthatȱ ŗ8ȱ

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mayȱbeȱissuedȱ.ȱ.ȱ.ȱrelatingȱtoȱtheȱoutcomeȱofȱtheȱSECȱactionȈȱ(internalȱquotationȱ ŗȱ
marksȱomitted)).ȱȱOtherȱdecisionsȱhaveȱsuggestedȱthatȱaȱclaimȱisȱnotȱwhollyȱ Řȱ
collateralȱifȱitȱhasȱbeenȱraisedȱinȱresponseȱto,ȱandȱsoȱisȱprocedurallyȱintertwinedȱ řȱ
with,ȱanȱadministrativeȱproceedingȱ—ȱregardlessȱofȱtheȱclaimȇsȱsubstantiveȱ 4ȱ
connectionȱtoȱtheȱinitialȱmeritsȱdisputeȱinȱtheȱproceeding.ȱȱSeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ śȱ
23ȱ(concludingȱthatȱclaimsȱarisingȱȈfromȱactionsȱtheȱCommissionȱtookȱinȱtheȱ Ŝȱ
courseȱofȱ[itsȱadministrative]ȱschemeȈȱwereȱnotȱȈwhollyȱcollateralȈ);ȱBebo,ȱ2015ȱ 7ȱ
WLȱų053Ůų,ȱatȱ*2ȬŮ,ȱ2015ȱU.S.ȱDist.ȱLEXISȱ25660,ȱatȱ*ŮȬ10ȱ(implicitlyȱconcludingȱ 8ȱ
thatȱtheȱrespondentȇsȱArticleȱIIȱchallengeȱdidȱnotȱqualifyȱasȱwhollyȱcollateralȱtoȱ 9ȱ
theȱongoingȱadministrativeȱproceedingȱbecauseȱitȱwasȱraisedȱthereȱasȱanȱ ŗŖȱ
affirmativeȱdefense).ȱȱSeeȱgenerallyȱBebo,ȱűųųȱF.3dȱatȱűű3ȬűŮȱ(comparingȱtheseȱtwoȱ ŗŗȱ
linesȱofȱdecisions).ȱ ŗŘȱ
Theȱdistrictȱcourtȱhereȱadoptedȱtheȱlatterȱapproach.ȱȱItȱbeganȱitsȱanalysisȱbyȱ ŗřȱ
notingȱthatȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱsubstantivelyȱ ŗ4ȱ
Ȉunrelatedȱtoȱtheȱsecuritiesȱviolationsȱunderlyingȱtheȱadministrativeȱproceeding,Ȉȱ ŗśȱ
suchȱthatȱresolvingȱtheȱchallengeȱȈcannotȱreasonablyȱbeȱcharacterizedȱasȱtheȱ ŗŜȱ
ȇregularȇȱorȱȇroutineȇȱbusinessȱofȱSECȱadministrativeȱproceedings.ȈȱȱTilton,ȱ2015ȱ ŗ7ȱ
WLȱŮ006165,ȱatȱ*11,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*31Ȭ32ȱ(quoting,ȱwithȱminorȱ ŗ8ȱ

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alterations,ȱElgin,ȱ132ȱS.ȱCt.ȱatȱ21Ů0).ȱȱNevertheless,ȱtheȱcourtȱdecidedȱthatȱtheȱ ŗȱ
claimȱdidȱnotȱqualifyȱasȱȈwhollyȱcollateralȈȱbecauseȱitȱwasȱprocedurallyȱ Řȱ
intertwinedȱwithȱtheȱSECȇsȱongoingȱproceeding,ȱwhereȱitȱfunctionedȱasȱanȱ řȱ
affirmativeȱdefense.ȱȱId.ȱatȱ2015ȱWLȱŮ006165,ȱatȱ*12,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱ 4ȱ
atȱ*32Ȭ3Ů.ȱ śȱ
AbsentȱfurtherȱguidanceȱfromȱtheȱSupremeȱCourt,ȱweȱareȱinclinedȱtoȱagreeȱ Ŝȱ
withȱtheȱdistrictȱcourtȇsȱassessment.ȱȱTheȱSECȱchoseȱtoȱenforceȱtheȱInvestmentȱ 7ȱ
AdvisersȱActȱagainstȱtheȱappellantsȱbyȱinitiatingȱanȱadministrativeȱproceedingȱ 8ȱ
andȱappointingȱanȱALJȱtoȱactȱasȱtheȱhearingȱofficer.ȱȱTheȱappellantsȇȱ 9ȱ
AppointmentsȱClauseȱclaimȱaroseȱdirectlyȱfromȱthatȱenforcementȱactionȱandȱ ŗŖȱ
servesȱasȱanȱaffirmativeȱdefenseȱwithinȱtheȱproceeding.ȱȱToȱbeȱsure,ȱtheȱclaimȱ ŗŗȱ
couldȱbeȱnarrowlyȱcategorizedȱasȱcollateralȱtoȱtheȱstatutoryȱmeritsȱofȱtheȱ ŗŘȱ
InvestmentȱAdvisersȱActȱchargesȱagainstȱtheȱappellants.ȱȱButȱweȱcannotȱconcludeȱ ŗřȱ
thatȱtheȱclaimȱisȱwhollyȱcollateralȱtoȱtheȱSECȇsȱadministrativeȱschemeȱmoreȱ ŗ4ȱ
broadly.ȱȱAsȱtheȱdistrictȱcourtȱrecognized,ȱitȱisȱȈdifficultȱtoȱseeȱhowȱ[theȱ ŗśȱ
AppointmentsȱClauseȱclaim]ȱcanȱstillȱbeȱconsideredȱȇcollateralȱtoȱanyȱ ŗŜȱ
Commissionȱordersȱorȱrulesȱfromȱwhichȱreviewȱmightȱbeȱsought,ȇȱsinceȱtheȱALJȱ ŗ7ȱ
andȱtheȱCommissionȱwill,ȱoneȱwayȱorȱanother,ȱruleȱonȱthoseȱclaimsȱandȱitȱwillȱbeȱ ŗ8ȱ

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theȱCommissionȇsȱorderȱthatȱ[theȱappellants]ȱwillȱappeal.ȈȱȱTilton,ȱ2015ȱWLȱ ŗȱ
Ů006165,ȱatȱ*12,ȱ2015ȱU.S.ȱDist.ȱLEXISȱŲ5015,ȱatȱ*32ȱ(citationȱandȱsomeȱinternalȱ Řȱ
quotationȱmarksȱomitted)ȱ(quotingȱFreeȱEnterprise,ȱ561ȱU.S.ȱatȱŮų0);ȱseeȱalsoȱJarkesy,ȱ řȱ
Ų03ȱF.3dȱatȱ23ȱ(reachingȱaȱsimilarȱconclusion).ȱȱPutȱanotherȱway,ȱtheȱ 4ȱ
AppointmentsȱClauseȱclaim,ȱlikeȱaccompanyingȱdefensesȱtoȱtheȱmeritsȱofȱtheȱ śȱ
InvestmentȱAdvisersȱActȱcharges,ȱisȱaȱȈvehicleȱbyȱwhichȈȱtheȱappellantsȱseekȱtoȱ Ŝȱ
prevailȱinȱtheȱproceeding.ȱȱElgin,ȱ132ȱS.ȱCt.ȱatȱ213ų.ȱȱTheȱclaimȱidentifiesȱaȱ 7ȱ
purportedȱerrorȱinȱtheȱwayȱtheȱCommissionȱhasȱsoughtȱtoȱenforceȱtheȱsecuritiesȱ 8ȱ
laws,ȱalbeitȱoneȱthatȱsoundsȱinȱadministrativeȱprocedureȱratherȱthanȱstatutoryȱ 9ȱ
construction.ȱ ŗŖȱ
TheȱdissentȱarguesȱthatȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱisȱasȱ ŗŗȱ
collateralȱtoȱtheȱSECȇsȱadministrativeȱschemeȱasȱtheȱaccountingȱfirmȇsȱ ŗŘȱ
AppointmentsȱClauseȱclaimȱwasȱinȱFreeȱEnterprise.ȱȱSeeȱanteȱatȱ16Ȭ1ű.ȱȱWeȱareȱnotȱ ŗřȱ
persuadedȱbyȱtheȱanalogy.ȱȱTheȱSupremeȱCourtȇsȱjurisdictionalȱconclusionȱinȱFreeȱ ŗ4ȱ
Enterpriseȱwas,ȱinȱourȱview,ȱshapedȱprincipallyȱbyȱtheȱabsenceȱofȱtheȱtypeȱofȱ ŗśȱ
proceduralȱlinkȱbetweenȱconstitutionalȱclaimȱandȱadministrativeȱproceedingȱthatȱ ŗŜȱ
existsȱhere.ȱȱTheȱaccountingȱfirmȱobjectedȱtoȱactionsȱthatȱtheȱPCAOBȱhadȱtakenȱ ŗ7ȱ
entirelyȱoutsideȱtheȱscopeȱofȱtheȱSECȇsȱschemeȱofȱadministrativeȱandȱjudicialȱ ŗ8ȱ

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reviewȱ—ȱactionsȱthatȱcouldȱnotȱbeȱtheȱsubjectȱofȱȈanyȱCommissionȱordersȱ.ȱ.ȱ.ȱ ŗȱ
fromȱwhichȱreviewȱmightȱbeȱsought.ȈȱȱFreeȱEnterprise,ȱ561ȱU.S.ȱatȱŮų0.ȱȱTheȱfirmȱ Řȱ
filedȱsuitȱinȱfederalȱdistrictȱcourt,ȱandȱtheȱSupremeȱCourtȱallowedȱtheȱsuitȱtoȱ řȱ
proceed,ȱbecauseȱtheȱAppointmentsȱClauseȱclaimȱwasȱnotȱmooredȱtoȱanyȱ 4ȱ
proceedingȱthatȱwouldȱprovideȱforȱanȱadministrativeȱadjudicationȱandȱ śȱ
subsequentȱjudicialȱreview.ŜȱȱHere,ȱbyȱcontrast,ȱtheȱappellantsȇȱAppointmentsȱ Ŝȱ
Clauseȱclaimȱtargetsȱanȱaspectȱofȱanȱongoingȱadministrativeȱproceeding.ȱȱWeȱ 7ȱ
thinkȱthatȱdistinctionȱsignificantlyȱaltersȱtheȱȈwhollyȱcollateralȈȱanalysis,ȱsuchȱ 8ȱ
thatȱtheȱsecondȱThunderȱBasinȱfactorȱdoesȱnotȱfavorȱdistrictȱcourtȱjurisdictionȱinȱ 9ȱ
thisȱcase.ȱȱSeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ23ȱ(notingȱthatȱaȱconstitutionalȱchallengeȱmightȱ ŗŖȱ
qualifyȱasȱcollateralȱifȱitȱȈwereȱfiledȱinȱcourtȱbeforeȱtheȱinitiationȱofȱanyȱ ŗŗȱ
administrativeȱproceeding,ȈȱasȱinȱFreeȱEnterprise,ȱbutȱconcludingȱthatȱ ŗŘȱ

ŜȱInȱexplainingȱwhyȱtheȱaccountingȱfirmȇsȱAppointmentsȱClauseȱclaimȱqualifiedȱasȱ
whollyȱcollateral,ȱtheȱFreeȱEnterpriseȱdecisionȱatȱoneȱpointȱcharacterizedȱtheȱclaimȱasȱanȱ
Ȉobject[ion]ȱtoȱtheȱ[PCAOBȇs]ȱexistence.ȈȱȱśŜŗȱU.S.ȱatȱ49Ŗ.ȱȱLikeȱtheȱD.C.ȱCircuit,ȱweȱdoȱ
notȱreadȱthatȱlanguageȱȈtoȱdefineȱaȱnewȱcategoryȱofȱcollateralȱclaimsȱthatȱfallȱoutsideȱanȱ
otherwiseȱexclusiveȱadministrativeȱscheme.ȈȱȱJarkesy,ȱ8ŖřȱF.řdȱatȱŘ4.ȱȱInȱourȱview,ȱtheȱ
SupremeȱCourtȱclassifiedȱtheȱaccountingȱfirmȇsȱclaimȱasȱwhollyȱcollateralȱbecauseȱtheȱ
PCAOBȇsȱdisputedȱactionsȱcouldȱnotȱbeȱreviewedȱbyȱtheȱCommission,ȱwhichȱmeantȱthatȱ
theȱfirmȇsȱAppointmentsȱClauseȱchallengeȱtoȱthoseȱactionsȱfellȱentirelyȱoutsideȱtheȱscopeȱ
ofȱtheȱadministrativeȱschemeȱandȱcouldȱnotȱbeȱresolvedȱbyȱaȱCommissionȱȈorder[]ȱ.ȱ.ȱ.ȱ
fromȱwhichȱ[judicial]ȱreviewȱmightȱbeȱsought.ȈȱȱFreeȱEnterprise,ȱśŜŗȱU.S.ȱatȱ49Ŗ.ȱ

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constitutionalȱchallengesȱwereȱnotȱcollateralȱwhenȱraisedȱinȱresponseȱtoȱȈmultipleȱ ŗȱ
aspectsȱofȱ[an]ȱongoingȱproceedingȈ).ȱ Řȱ
C.ȱ AgencyȱExpertiseȱ řȱ
TheȱfinalȱconsiderationȱwithinȱtheȱThunderȱBasinȱframeworkȱisȱwhetherȱtheȱ 4ȱ
appellantsȇȱAppointmentsȱClauseȱclaimȱfallsȱoutsideȱtheȱSECȇsȱexpertise.ȱȱThisȱisȱaȱ śȱ
closeȱquestion.ȱȱAsȱanȱinitialȱmatter,ȱtheȱSupremeȱCourtȇsȱdecisionȱinȱFreeȱ Ŝȱ
EnterpriseȱsuggestsȱthatȱtheȱSECȱdoesȱnotȱpossessȱuniqueȱlegalȱexpertiseȱinȱ 7ȱ
analyzingȱtheȱconstitutionalȱsufficiencyȱofȱitsȱappointments.ȱȱThere,ȱtheȱCourtȱ 8ȱ
concludedȱthatȱtheȱmeritsȱofȱanȱAppointmentsȱClauseȱchallengeȱtoȱtheȱPCAOBȱ 9ȱ
fellȱȈoutsideȱtheȱCommissionȇsȱcompetenceȱandȱexpertiseȈȱbecauseȱtheȱclaimȱ ŗŖȱ
raisedȱonlyȱȈstandardȱquestionsȱofȱadministrativeȱlaw,Ȉȱwhichȱwereȱunrelatedȱtoȱ ŗŗȱ
anyȱȈstatutoryȈȱorȱȈfactȬboundȱinquiriesȈȱthatȱtheȱSECȱmightȱbeȱsingularlyȱ ŗŘȱ
qualifiedȱtoȱperform.ȱȱ561ȱU.S.ȱatȱŮų1.ȱ ŗřȱ
UnderȱToucheȱRoss,ȱthatȱconclusionȱmightȱendȱourȱanalysisȱofȱagencyȱ ŗ4ȱ
expertise.ȱȱAsȱnoted,ȱtheȱpanelȱthereȱpermittedȱrespondentsȱtoȱchallengeȱanȱ ŗśȱ
ongoingȱSECȱadministrativeȱproceedingȱinȱfederalȱdistrictȱcourtȱsolelyȱbecauseȱ ŗŜȱ
theȱlegalȱsubstanceȱofȱtheȱchallengeȱfellȱoutsideȱtheȱadministrativeȱtribunalȇsȱ ŗ7ȱ
expertiseȱandȱcouldȱnotȱbeȱusefullyȱdevelopedȱthroughȱitsȱfactfinding.ȱȱ60ųȱF.2dȱ ŗ8ȱ

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atȱ5űű.ȱȱButȱtheȱSupremeȱCourtȱhasȱsinceȱadoptedȱaȱbroaderȱconceptionȱofȱagencyȱ ŗȱ
expertiseȱinȱtheȱjurisdictionalȱcontext.ȱȱElgin,ȱinȱparticular,ȱemphasizesȱthatȱanȱ Řȱ
agencyȱmayȱbringȱitsȱexpertiseȱtoȱbearȱonȱaȱconstitutionalȱclaimȱindirectly,ȱbyȱ řȱ
resolvingȱaccompanying,ȱpotentiallyȱdispositiveȱissuesȱinȱtheȱsameȱproceeding.ȱȱ 4ȱ
SeeȱJarkesy,ȱŲ03ȱF.3dȱatȱ2ŲȬ2ųȱ(notingȱthatȱȈElginȱ.ȱ.ȱ.ȱclarifiedȱ.ȱ.ȱ.ȱthatȱanȱagencyȇsȱ śȱ
relative[lyȱlow]ȱlevelȱofȱinsightȱintoȱtheȱmeritsȱofȱaȱconstitutionalȱquestionȱisȱnotȱ Ŝȱ
determinativeȈȱofȱwhetherȱtheȱagencyȱcanȱbringȱitsȱexpertiseȱtoȱbear).ȱ 7ȱ
InȱElgin,ȱfederalȱemployeesȱwhoȱallegedlyȱhadȱbeenȱdischargedȱforȱ 8ȱ
violatingȱaȱstatutoryȱcommandȱsoughtȱreinstatementȱbyȱchallengingȱtheȱ 9ȱ
constitutionalityȱofȱtheȱstatute.ȱȱCongressȱhadȱpreviouslyȱcreatedȱanȱ ŗŖȱ
administrativeȱprocessȱtoȱadjudicateȱspecifiedȱpersonnelȱdecisionsȱregardingȱ ŗŗȱ
federalȱemployees,ȱwhichȱwasȱconductedȱinitiallyȱbyȱtheȱMeritȱSystemsȱ ŗŘȱ
ProtectionȱBoardȱ(ȈMSPBȈ)ȱandȱsubjectȱtoȱreviewȱinȱtheȱFederalȱCircuit.ȱȱBeforeȱ ŗřȱ
completingȱthatȱadministrativeȱprocess,ȱtheȱemployeesȱattemptedȱtoȱraiseȱtheirȱ ŗ4ȱ
constitutionalȱchallengeȱtoȱtheȱstatuteȱinȱfederalȱdistrictȱcourt.ȱȱInȱanȱeffortȱtoȱ ŗśȱ
establishȱfederalȱjurisdiction,ȱtheyȱcontendedȱthatȱtheȱclaimȱfellȱoutsideȱtheȱ ŗŜȱ
MSPBȇsȱexpertiseȱbecauseȱtheȱMSPBȱdisclaimedȱauthorityȱtoȱdetermineȱtheȱ ŗ7ȱ
constitutionalityȱofȱaȱfederalȱstatute.ȱȱElgin,ȱ132ȱS.ȱCt.ȱatȱ2130Ȭ31,ȱ21Ů0.ȱ ŗ8ȱ

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TheȱSupremeȱCourtȱdisagreed.ȱȱAlthoughȱtheȱMSPBȱhadȱindeedȱdisclaimedȱ ŗȱ
authorityȱtoȱresolveȱconstitutionalȱchallengesȱtoȱstatutes,ȱtheȱCourtȱidentifiedȱ Řȱ
severalȱwaysȱinȱwhichȱtheȱagencyȱmightȱȈotherwiseȈȱbringȱitsȱexpertiseȱȈtoȱbearȈȱ řȱ
inȱproceedingsȱthatȱraisedȱthoseȱchallenges.ȱȱFirst,ȱtheȱMSPBȱcouldȱresolveȱ 4ȱ
ȈpreliminaryȱquestionsȱuniqueȱtoȱtheȱemploymentȱcontextȈȱthatȱmightȱȈobviateȱ śȱ
theȱneedȱtoȱaddressȱtheȱconstitutionalȱchallenge.ȈȱȱId.ȱatȱ21Ů0.ȱȱSecond,ȱȈtheȱ Ŝȱ
challengedȱstatuteȱ[could]ȱbeȱoneȱthatȱtheȱMSPBȱregularlyȱconstrues,ȱandȱitsȱ 7ȱ
statutoryȱinterpretationȱcouldȱalleviateȱconstitutionalȱconcerns.ȈȱȱId.ȱȱAndȱthird,ȱ 8ȱ
Ȉanȱemployeeȇsȱappealȱ[could]ȱinvolveȱotherȱstatutoryȱorȱconstitutionalȱclaimsȱ 9ȱ
thatȱtheȱMSPBȱroutinelyȱconsiders,ȱinȱadditionȱtoȱaȱconstitutionalȱchallengeȱtoȱaȱ ŗŖȱ
federalȱstatute,ȈȱwhoseȱresolutionȱȈinȱtheȱemployeeȇsȱfavorȱmightȱfullyȱdisposeȱofȱ ŗŗȱ
theȱcase.ȈȱȱId.ȱȱInȱlightȱofȱthoseȱpotentialȱapplicationsȱofȱagencyȱexpertiseȱtoȱotherȱ ŗŘȱ
dimensionsȱofȱtheȱadministrativeȱproceeding,ȱtheȱCourtȱconcludedȱthatȱthereȱwasȱ ŗřȱ
ȈnoȱreasonȱtoȱconcludeȱthatȱCongressȱintendedȱtoȱexemptȈȱtheȱemployeesȇȱ ŗ4ȱ
constitutionalȱchallengeȱȈfromȱexclusiveȱreviewȱbeforeȱtheȱMSPBȱandȱtheȱFederalȱ ŗśȱ
Circuit.ȈȱȱId.ȱ ŗŜȱ
ApplyingȱElginȇsȱapproachȱhere,ȱweȱthinkȱthatȱtheȱSECȱmightȱbringȱitsȱ ŗ7ȱ
expertiseȱtoȱbearȱonȱtheȱappellantsȇȱproceedingȱbyȱresolvingȱaccompanyingȱ ŗ8ȱ

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statutoryȱclaimsȱthatȱitȱȈroutinelyȱconsiders,ȈȱandȱwhichȱȈmightȱfullyȱdisposeȱofȱ ŗȱ
theȱcaseȈȱinȱtheȱappellantsȇȱfavor.ȱȱ132ȱS.ȱCt.ȱatȱ21Ů0.ȱȱInȱparticular,ȱtheȱ Řȱ
CommissionȱcouldȱruleȱthatȱtheȱappellantsȱdidȱnotȱviolateȱtheȱInvestmentȱ řȱ
AdvisersȱAct,ȱinȱwhichȱcaseȱtheȱconstitutionalȱquestionȱwouldȱbecomeȱmoot.ȱȱȱ 4ȱ
Itȱmayȱbeȱarguedȱthatȱtheȱapplicationȱofȱagencyȱexpertiseȱtoȱtheȱstatutoryȱ śȱ
issuesȱinȱtheȱappellantsȇȱproceedingȱwouldȱimproperlyȱskipȱoverȱtheirȱ Ŝȱ
AppointmentsȱClauseȱclaim,ȱwhichȱraisesȱaȱȈthresholdȈȱissueȱthatȱlogicallyȱ 7ȱ
precedesȱaȱmeritsȱadjudication.ȱȱAlthoughȱweȱareȱmindfulȱofȱthatȱconcern,ȱtheȱ 8ȱ
SupremeȱCourtȱappearsȱtoȱhaveȱrejectedȱanȱanalogousȱargumentȱinȱStandardȱOil.ȱȱ 9ȱ
There,ȱtheȱrespondentȱoilȱcompany,ȱlikeȱtheȱappellantsȱhere,ȱsoughtȱtoȱraiseȱaȱ ŗŖȱ
ȈthresholdȈȱchallengeȱtoȱitsȱadministrativeȱproceedingȱasȱaȱwholeȱsoonȱafterȱtheȱ ŗŗȱ
proceedingȱbegan.ȱȱTheȱNinthȱCircuitȱpermittedȱtheȱdistrictȱcourtȱtoȱexerciseȱ ŗŘȱ
jurisdictionȱoverȱthatȱchallenge,ȱinȱpartȱbecauseȱitȱfearedȱthatȱtheȱoilȱcompanyȇsȱ ŗřȱ
victoryȱonȱotherȱgroundsȱinȱtheȱadministrativeȱproceedingȱwouldȱevade,ȱandȱ ŗ4ȱ
improperlyȱȈmoot,Ȉȱtheȱthresholdȱissue.ȱȱStandardȱOilȱCo.ȱofȱCal.ȱv.ȱFTC,ȱ5ų6ȱF.2dȱ ŗśȱ
13Ų1,ȱ13Ųűȱ(ųthȱCir.ȱ1ųűų),ȱrevȇd,ȱŮŮųȱU.S.ȱ232ȱ(1ųŲ0).ȱȱTheȱSupremeȱCourtȱ ŗŜȱ
expresslyȱrejectedȱthatȱrationaleȱandȱreversed,ȱexplaining:ȱ ŗ7ȱ
[O]neȱofȱtheȱprincipalȱreasonsȱtoȱawaitȱtheȱterminationȱofȱagencyȱ ŗ8ȱ
proceedingsȱisȱtoȱobviateȱallȱoccasionȱforȱjudicialȱreview.ȱȱThus,ȱtheȱ ŗ9ȱ

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possibilityȱthatȱ[theȱoilȱcompanyȇs]ȱchallengeȱmayȱbeȱmootedȱinȱ ŗȱ
adjudicationȱwarrantsȱtheȱrequirementȱthatȱ[theȱcompany]ȱpursueȱ Řȱ
adjudication,ȱnotȱshortcutȱit.ȱ řȱ
ȱ 4ȱ
StandardȱOil,ȱŮŮųȱU.S.ȱatȱ2ŮŮȱn.11ȱ(internalȱquotationȱmarksȱandȱcitationsȱ śȱ
omitted).ȱȱInȱlightȱofȱthatȱpassage,ȱweȱareȱinclinedȱtoȱreadȱElginȇsȱmentionȱofȱ Ŝȱ
ȈotherȱstatutoryȱorȱconstitutionalȱclaimsȈȱthatȱmightȱȈfullyȱdisposeȱofȱtheȱcase,Ȉȱ 7ȱ
132ȱS.ȱCt.ȱatȱ21Ů0,ȱtoȱincludeȱtheȱInvestmentȱAdvisersȱActȱchargesȱhere.ȱ 8ȱ
SuchȱaȱreadingȱofȱElginȱdovetailsȱwithȱourȱanalysisȱofȱtheȱavailabilityȱofȱ 9ȱ
meaningfulȱjudicialȱreview.ȱȱWeȱhaveȱalreadyȱconcluded,ȱinȱkeepingȱwithȱ ŗŖȱ
establishedȱfederalȱpracticeȱregardingȱanalogousȱdisputes,ȱthatȱtheȱappellantsȱ ŗŗȱ
mayȱadequatelyȱvindicateȱtheirȱAppointmentsȱClauseȱclaimȱbyȱfirstȱawaitingȱaȱ ŗŘȱ
finalȱCommissionȱorderȱandȱthenȱpetitioningȱforȱjudicialȱreviewȱonȱconstitutionalȱ ŗřȱ
groundsȱonlyȱifȱtheȱorderȱisȱadverse.ȱȱByȱtheȱsameȱlogic,ȱaȱfavorableȱCommissionȱ ŗ4ȱ
order,ȱincludingȱoneȱonȱstatutoryȱgrounds,ȱwouldȱprovideȱanȱacceptableȱ ŗśȱ
resolutionȱofȱtheȱAppointmentsȱClauseȱclaimȱandȱobviateȱanyȱneedȱforȱjudicialȱ ŗŜȱ
review.ȱȱItȱfollows,ȱweȱthink,ȱthatȱtheȱCommissionȱmayȱbringȱitsȱexpertiseȱtoȱbearȱ ŗ7ȱ
inȱaȱmannerȱpotentiallyȱrelevantȱtoȱtheȱconstitutionalȱissueȱbyȱresolvingȱtheȱ ŗ8ȱ
statutoryȱchargesȱagainstȱtheȱappellants.ȱȱForȱthatȱreason,ȱtheȱfinalȱThunderȱBasinȱ ŗ9ȱ
factorȱlendsȱminimalȱsupportȱtoȱtheȱappellantsȇȱjurisdictionalȱargument.ȱȱSeeȱ ŘŖȱ

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Jarkesy,ȱŲ03ȱF.3dȱatȱ2ųȱ(concludingȱthatȱȈtheȱCommissionȇsȱexpertiseȱcanȱotherwiseȱ ŗȱ
beȱbroughtȱtoȱbearȱonȱtheȱissuesȱinȱ[theȱrespondentȇs]ȱproceedingȈȱbecauseȱȈtheȱ Řȱ
agencyȱcouldȱmootȱtheȱneedȱtoȱresolveȈȱtheȱrespondentȇsȱconstitutionalȱclaims,ȱ řȱ
includingȱseveralȱthresholdȱchallengesȱtoȱtheȱproceedingȱasȱaȱwhole,ȱȈbyȱfindingȱ 4ȱ
thatȱheȱdidȱnotȱcommitȱtheȱsecuritiesȬlawȱviolationsȱofȱwhichȱheȱstandsȱaccusedȈȱ śȱ
(internalȱquotationȱmarksȱomitted));ȱBebo,ȱűųųȱF.3dȱatȱűű3ȱ(ȈElginȱexplainedȱthatȱ Ŝȱ
theȱpossibilityȱthatȱ[theȱrespondent]ȱmightȱprevailȱinȱtheȱadministrativeȱ 7ȱ
proceedingȱ(andȱtherebyȱavoidȱtheȱneedȱtoȱraiseȱherȱconstitutionalȱclaimsȱinȱanȱ 8ȱ
ArticleȱIIIȱcourt)ȱdoesȱnotȱrenderȱtheȱstatutoryȱreviewȱschemeȱinadequate.Ȉ).ȱ 9ȱ
CONCLUSIONȱ ŗŖȱ
AfterȱconsideringȱeachȱofȱtheȱThunderȱBasinȱfactors,ȱweȱconcludeȱthatȱ ŗŗȱ
CongressȱintendedȱtheȱappellantsȇȱAppointmentsȱClauseȱclaimȱȈtoȱbeȱreviewedȱ ŗŘȱ
withinȈȱtheȱSECȇsȱexclusiveȱȈstatutoryȱstructure.ȈȱȱFreeȱEnterprise,ȱ561ȱU.S.ȱatȱŮŲųȱ ŗřȱ
(quotingȱThunderȱBasin,ȱ510ȱU.S.ȱatȱ20ű).ȱȱTheȱȈthresholdȈȱnatureȱofȱtheȱclaimȱdoesȱ ŗ4ȱ
notȱdefeatȱtheȱpresumptionȱthatȱit,ȱlikeȱotherȱproceduralȱandȱsubstantiveȱ ŗśȱ
defensesȱtoȱanȱenforcementȱaction,ȱmustȱbeȱresolvedȱinȱtheȱfirstȱinstanceȱthroughȱ ŗŜȱ
agencyȱproceedings.ȱȱToȱtheȱcontrary:ȱȱȈManyȱrespondentsȱinȱSECȱproceedingsȱ ŗ7ȱ
joinȱsubstantiveȱdefensesȱtoȱtheirȱsecuritiesȱchargesȱtogetherȱwithȱchallengesȱtoȱ ŗ8ȱ

-- 36 of 65 --

ř7

theȱCommissionȇsȱactionsȱorȱauthority.ȱȱItȱmakesȱgoodȱsenseȱtoȱconsolidateȱallȱofȱ ŗȱ
eachȱrespondentȇsȱissuesȱbeforeȱoneȱcourtȱforȱreview,ȱandȱonlyȱafterȱanȱadverseȱ Řȱ
Commissionȱorderȱmakesȱthatȱreviewȱnecessary.ȈȱȱJarkesy,ȱŲ03ȱF.3dȱatȱ2ųȬ30.ȱȱWeȱ řȱ
thereforeȱconclude,ȱinȱkeepingȱwithȱtheȱdecisionsȱofȱtheȱSeventhȱandȱD.C.ȱ 4ȱ
CircuitsȱinȱBeboȱandȱJarkesy,ȱthatȱtheȱappellantsȱmustȱawaitȱaȱfinalȱCommissionȱ śȱ
orderȱbeforeȱraisingȱtheirȱAppointmentsȱClauseȱclaimȱinȱfederalȱcourt.ȱȱTheȱ Ŝȱ
judgmentȱofȱtheȱdistrictȱcourtȱisȱAFFIRMED,ȱandȱourȱstayȱonȱfurtherȱproceedingsȱ 7ȱ
byȱtheȱSECȱisȱVACATED.ȱ 8ȱ

-- 37 of 65 --

Tilton v. Securities and Exchange Commission
Docket No. 15-2103
Jon O. Newman, Circuit Judge, concurring:
An additional reason why the Appellants in this case must
raise their Appointments Clause issue by filing a petition for
review in a court of appeals rather than initiate a new action
in a district court is a concept that has been called
“colorable jurisdiction.” As the Seventh Circuit has
explained in a case challenging an order of criminal contempt,
"If a court has colorable jurisdiction of a case, though later
it is determined that actually it didn't have jurisdiction, an
order of criminal contempt issued by the court before the
absence of jurisdiction is determined is valid." Mann v.
Calumet City, 588 F.3d 949, 954 (7th Cir. 2009).
The Supreme Court, without using the phrase “colorable
jurisdiction,” made the same point in United States v. United
Mine Workers of America, 330 U.S. 258 (1947). The Court there
ruled that even if the constitutionality of a statute is in
doubt, an order issued by a court under that statute must be
obeyed and enforced even by criminal contempt. See id. at 293.
The Court noted that "a different result would follow were the
question of jurisdiction frivolous and not substantial," id.,
or, as Justice Frankfurter’s concurrence put it, the "court is
1

-- 38 of 65 --

so obviously traveling outside its orbit as to be merely
usurping judicial forms and facilities," id. at 309
(Frankfurter, J., concurring).
The concept of colorable jurisdiction has also been
deemed relevant to the availability of a collateral attack to
challenge a judgment for lack of subject matter jurisdiction.
Courts have distinguished between an erroneous assertion of
subject matter jurisdiction, where collateral attack is
precluded by res judicata, and a clear usurpation of judicial
power, where collateral attack is permitted. See Nemaizer v.
Baker, 793 F.2d 58, 65 (2d Cir. 1986) (collecting cases); see
also Restatement (Second) of Judgments § 12(1) (1982).
“Collateral attack is available only if the assertion of
subject matter jurisdiction was without colorable basis, not
merely erroneous." In re U.S. Catholic Conference, 824 F.2d
156, 165 (2d Cir. 1987), rev'd on other grounds, U.S. Catholic
Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72
(1988) (on direct appeal, nonparty witness held in civil
contempt may challenge subject matter jurisdiction of court in
underlying action).
The Administrative Law Judge (“ALJ”) that will be hearing
the pending administrative proceeding against the Appellants
is not an interloper. The ALJ is an official of the agency,
2

-- 39 of 65 --

facially clothed with authority to adjudicate the proceeding
before her. Whether her appointment comports with the
Appointments Clause is a fair question, but there is surely a
plausible basis for arguing that her appointment is valid.
With colorable jurisdiction, the ALJ may adjudicate the
administrative case, and the losing party will have its
opportunity to seek review before the Commission and then
petition for review of a final order in a Court of Appeals,
see 15 U.S.C. § 80b-13(a).
For this additional reason, I concur in Judge Sack’s
opinion for the Court.
3

-- 40 of 65 --

ȱ
DRONEY,ȱCircuitȱJudge,ȱdissenting:ȱ 1
ThisȱcaseȱisȱnearlyȱindistinguishableȱfromȱFreeȱEnterpriseȱFundȱ 2
v.ȱPublicȱCo.ȱAccountingȱOversightȱBoard,ȱ561ȱU.S.ȱ477ȱ(2010).ȱȱItȱdiffersȱ 3
inȱonlyȱoneȱsignificantȱway:ȱadministrativeȱproceedingsȱhaveȱbegunȱ 4
againstȱtheȱappellants.ȱȱTheȱmajorityȱconcludesȱthatȱthisȱdistinctionȱ 5
aloneȱ warrantsȱ aȱ differentȱ outcome,ȱ findingȱ thatȱ theȱ factȱ ofȱ theȱ 6
ongoingȱ proceedingsȱ meansȱ thatȱ theȱ threeȱ factorsȱ identifiedȱ byȱ theȱ 7
SupremeȱCourtȱinȱThunderȱBasinȱCoalȱCo.ȱv.ȱReich,ȱ510ȱU.S.ȱ200ȱ(1994)ȱ 8
forȱ determiningȱ whetherȱ Congressȱ intendedȱ toȱ limitȱ jurisdictionȱ ofȱ 9
theȱ districtȱ courtsȱ areȱ satisfied.ȱ ȱ Consequently,ȱ theȱ majorityȱ holdsȱ 10
thatȱthereȱwasȱnoȱsubjectȱmatterȱjurisdictionȱbeforeȱtheȱdistrictȱcourt.ȱ 11
Iȱ respectfullyȱ dissent.ȱ ȱ Theȱ majority’sȱ applicationȱ ofȱ theȱ 12
Thunderȱ Basinȱ factorsȱ hasȱ strippedȱ theȱ “whollyȱ collateral”ȱ andȱ 13
“outsideȱ theȱ agency’sȱ expertise”ȱ factorsȱ ofȱ anyȱ significance:ȱ inȱ itsȱ 14
view,ȱ asȱ longȱ asȱ administrativeȱ proceedingsȱ haveȱ beenȱ initiated,ȱ 15
thoseȱ twoȱ factorsȱ areȱ alwaysȱ satisfied.ȱ ȱ Theȱ majorityȱ basesȱ itsȱ 16

-- 41 of 65 --

2ȱ

understandingȱofȱthisȱsubstantiveȬtoȬproceduralȱswitchȱinȱthoseȱtwoȱ 1
factorsȱ onȱ theirȱ applicationȱ byȱ theȱ Supremeȱ Courtȱ inȱ Elginȱ v.ȱ 2
Departmentȱ ofȱ Treasury,ȱ 132ȱ S.ȱ Ct.ȱ 2126ȱ (2012),ȱ butȱ theȱ natureȱ ofȱ theȱ 3
constitutionalȱ claimȱ presentedȱ inȱ Elginȱ wasȱ entirelyȱ different.ȱ ȱ Iȱ 4
disagreeȱ withȱ theȱ majority’sȱ interpretationȱ ofȱ Elginȱ andȱ concludeȱ 5
thatȱthoseȱtwoȱThunderȱBasinȱfactorsȱmustȱbeȱanalyzedȱsubstantivelyȱ 6
toȱdetermineȱtheirȱweightȱinȱeachȱparticularȱcase.ȱȱȱ 7
IȱconcludeȱthatȱFreeȱEnterpriseȱcontrolsȱhere.ȱȱInȱmyȱview,ȱthoseȱ 8
twoȱfactorsȱhereȱhaveȱpreciselyȱtheȱsameȱweightȱasȱtheyȱdidȱinȱFreeȱ 9
Enterprise,ȱ andȱ theȱ applicationȱ ofȱ theȱ remainingȱ factorȱ doesȱ notȱ 10
changeȱ theȱ result.ȱ ȱ Thus,ȱ Iȱ wouldȱ findȱ thatȱ theȱ districtȱ courtȱ hadȱ 11
subjectȱmatterȱjurisdictionȱtoȱconsiderȱtheȱconstitutionalȱchallenge.ȱȱȱ 12
I. TheȱThunderȱBasinȱFactorsȱ 13
Theȱ Supremeȱ Courtȱ inȱ Thunderȱ Basinȱ identifiedȱ theȱ followingȱ 14
threeȱ factorsȱ asȱ helpfulȱ inȱ determiningȱ whetherȱ aȱ statuteȱ whichȱ 15
providesȱforȱadministrativeȱreviewȱofȱagencyȱactionȱwasȱintendedȱbyȱ 16

-- 42 of 65 --

3ȱ

Congressȱtoȱprecludeȱdistrictȱcourtȱjurisdictionȱoverȱclaimsȱbeforeȱaȱ 1
finalȱ administrativeȱ determination:ȱ whetherȱ theȱ claimsȱ areȱ “whollyȱ 2
collateralȱ toȱ aȱ statuteȇsȱ reviewȱ provisions,”ȱ whetherȱ theyȱ areȱ 3
“outsideȱ theȱ agencyȇsȱ expertise,”ȱ andȱ whetherȱ “aȱ findingȱ ofȱ 4
preclusionȱ couldȱ forecloseȱ allȱ meaningfulȱ judicialȱ review.”ȱ ȱ Id.ȱ atȱ 5
212–13ȱ (internalȱ quotationȱ marksȱ omitted).ȱ ȱ Theȱ Courtȱ referredȱ toȱ 6
eachȱ asȱ helpingȱ determineȱ whetherȱ itȱ isȱ “fairlyȱ discernible”ȱ fromȱ aȱ 7
“statutoryȱscheme”ȱthatȱCongressȱ“hasȱallocatedȱinitialȱreviewȱtoȱanȱ 8
administrativeȱbody.”ȱId.ȱatȱ207,ȱ212–13.1ȱȱȱ 9
Iȱdisagreeȱsomewhatȱwithȱtheȱmajority’sȱinterpretationȱofȱtheȱ 10
thirdȱ factor,ȱ “meaningfulȱ judicialȱ review,”ȱ butȱ itȱ isȱ theȱ majority’sȱ 11

1 The majority describes the Thunder Basin factors as coming into play only in the second part of a
two-part test, seemingly splitting the analysis between asking (1) whether Congress intended to
preclude district court jurisdiction and (2) whether Congress intended for the claims at issue to be
reviewed within the statutory structure. Majority Op. at 10–11. I disagree with this dichotomy
and the conclusion that the factors are relevant only to the second inquiry. See, e.g., Elgin, 132 S.
Ct. at 2136 (referring to Thunder Basin factors as relevant to the single argument characterized
variously as: “Congress does not intend to limit district court jurisdiction” (alterations omitted)
and “[Petitioners’] claims are not the type that Congress intended to be reviewed within the
[administrative] scheme”). However, the majority opinion does not return to this schema and
thereafter focuses on the Thunder Basin factors as answering the ultimate question of whether the
appellants are precluded from bringing their constitutional claims in the district court.

-- 43 of 65 --

4ȱ

applicationȱ ofȱ theȱ twoȱ otherȱ factors—“whollyȱ collateral”ȱ andȱ 1
“outsideȱtheȱagency’sȱexpertise”—withȱwhichȱIȱmostȱdisagree.ȱȱȱ 2
Thereȱ areȱ threeȱ casesȱ inȱ whichȱ theȱ Supremeȱ Courtȱ hasȱ 3
reviewedȱ theȱ applicationȱ ofȱ theseȱ threeȱ factors:ȱ Thunderȱ Basin,ȱ Freeȱ 4
Enterprise,ȱandȱElgin.ȱȱȱȱInȱeach,ȱtheȱSupremeȱCourt’sȱanalysisȱofȱtheȱ 5
“whollyȱcollateral”ȱandȱ“outsideȱtheȱagency’sȱexpertise”ȱfactorsȱhasȱ 6
focusedȱonȱtheȱsubstanceȱofȱtheȱclaims.ȱ 7
Inȱ Thunderȱ Basin,ȱ aȱ nonȬunionȱ mineȱ ownerȱ filedȱ anȱ actionȱ inȱ 8
districtȱcourtȱchallengingȱitsȱemployees’ȱdesignationȱofȱcertainȱunionȱ 9
representativesȱ toȱ beȱ involvedȱ inȱ safetyȱ inspectionsȱ underȱ theȱ 10
Federalȱ Mineȱ Safetyȱ andȱ Healthȱ Amendmentsȱ Actȱ (“Mineȱ Act”).ȱȱ 11
Theȱ Mineȱ Actȱ providedȱ forȱ administrativeȱ hearingsȱ andȱ decisionsȱ 12
concerningȱ safetyȱ issues,ȱ andȱ ultimateȱ appealȱ toȱ theȱ Courtsȱ ofȱ 13
Appeals.ȱ ȱ Respondentsȱ contendedȱ thatȱ thisȱ “comprehensiveȱ reviewȱ 14
process,”ȱ id.ȱ atȱ 208,ȱ inȱ theȱ Mineȱ Actȱ indicatedȱ thatȱ Congressȱ 15
intendedȱ thatȱ theȱ safetyȱ claimȱ beȱ exclusivelyȱ reviewedȱ inȱ theȱ 16

-- 44 of 65 --

5ȱ

“statutoryȱstructure,”ȱid.ȱatȱ212,ȱandȱthatȱthereȱwasȱnoȱsubjectȱmatterȱ 1
jurisdictionȱforȱtheȱmineȱowner’sȱsuitȱinȱtheȱdistrictȱcourt.ȱȱȱ 2
Inȱ itsȱ analysisȱ ofȱ whetherȱ theȱ mineȱ owner’sȱ claimsȱ mustȱ firstȱ 3
beȱ broughtȱ inȱ anȱ administrativeȱ proceeding,ȱ theȱ Supremeȱ Courtȱ 4
analyzedȱ theȱ “whollyȱ collateral”ȱ andȱ “outsideȱ theȱ agency’sȱ 5
expertise”ȱ factorsȱ onlyȱ byȱ consideringȱ theȱ substanceȱ ofȱ theȱ claimsȱ 6
withȱnoȱmentionȱofȱtheȱproceduralȱaspectsȱofȱtheȱcase.ȱȱId.ȱatȱ213–14ȱ 7
(notingȱ thatȱ “Petitioner’sȱ statutoryȱ claimsȱ atȱ rootȱ requireȱ 8
interpretationȱ ofȱ theȱ parties’ȱ rightsȱandȱdutiesȱ underȱ [theȱMineȱ Actȱ 9
andȱ accompanyingȱ regulations],ȱ andȱ asȱ suchȱ ariseȱ underȱ theȱ Mineȱ 10
Actȱ andȱ fallȱ squarelyȱ withinȱ theȱ Commission’sȱ expertise”ȱ andȱ thatȱ 11
theȱ agencyȱ hasȱ “extensiveȱ experienceȱ interpretingȱ theȱwalkȬaroundȱ 12
rights”ȱthatȱwereȱatȱissue).ȱȱȱ 13
Theȱ Supremeȱ Courtȱ engagedȱ inȱ theȱ sameȱ sortȱ ofȱ substantiveȱ 14
analysisȱinȱFreeȱEnterprise.ȱȱInȱFreeȱEnterprise,ȱanȱaccountingȱfirmȱfiledȱ 15
anȱ actionȱ inȱ theȱ districtȱ courtȱ whichȱ challengedȱ aȱ reportȱ issuedȱ byȱ 16

-- 45 of 65 --

6ȱ

theȱ newlyȱ createdȱ Publicȱ Companyȱ Accountingȱ Oversightȱ Boardȱ 1
(“PCAOB”).ȱ ȱ Theȱ PCAOBȱ wasȱ createdȱ asȱ anȱ accountingȱ reformȱ inȱ 2
theȱSarbanesȬOxleyȱActȱofȱ2002ȱandȱitsȱmembersȱwereȱappointedȱbyȱ 3
theȱSEC.ȱȱTheȱreportȱhadȱcriticizedȱtheȱfirm’sȱaccountingȱprocedures,ȱ 4
butȱnoȱsanctionsȱwereȱimposed.ȱȱThus,ȱtheȱaccountingȱfirmȱcouldȱnotȱ 5
utilizeȱ theȱ statutoryȱ administrativeȱ reviewȱ proceedingsȱ availableȱ 6
beforeȱ theȱ SEC.ȱ ȱ Theȱ actionȱ inȱ theȱ districtȱ courtȱ byȱ theȱ accountingȱ 7
firmȱ challengedȱ theȱ appointmentsȱ ofȱ theȱ PCAOBȱ membersȱ byȱ theȱ 8
SEC,ȱ claimingȱ thatȱ theyȱ violatedȱ theȱ Appointmentsȱ Clauseȱ ofȱ theȱ 9
Constitutionȱandȱtheȱmembersȱhadȱnoȱauthorityȱtoȱissueȱtheȱnegativeȱ 10
report.ȱ ȱ Theȱ PCAOBȱ soughtȱ toȱ dismissȱ theȱ actionȱ onȱ theȱ basisȱ thatȱ 11
theȱ districtȱ courtȱ hadȱ noȱ subjectȱ matterȱ jurisdictionȱ toȱ considerȱ theȱ 12
accountingȱfirm’sȱclaim.ȱ 13
Inȱ itsȱ analysisȱ ofȱ theȱ “whollyȱ collateral”ȱ andȱ “outsideȱ theȱ 14
agency’sȱ review”ȱ factors,ȱ theȱ Freeȱ Enterpriseȱ Courtȱ examinedȱ theȱ 15
substanceȱofȱtheȱconstitutionalȱclaimȱasȱitȱrelatedȱtoȱagencyȱexpertise,ȱ 16

-- 46 of 65 --

7ȱ

561ȱ U.S.ȱ atȱ 491ȱ (“[T]heȱ statutoryȱ questionsȱ involvedȱ doȱ notȱ requireȱ 1
technicalȱ considerationsȱ ofȱ agencyȱ policy.”ȱ (quotationȱ marksȱ andȱ 2
alterationsȱomitted)),ȱandȱexplainedȱtheȱ“whollyȱcollateral”ȱfactorȱinȱ 3
termsȱ ofȱ theȱ substantiveȱ contentȱ ofȱ theȱ challenge,ȱ id.ȱ atȱ 490.ȱ 4
(“[P]etitionersȱ objectȱ toȱ theȱ Board’sȱ existence,ȱ notȱ toȱ anyȱ ofȱ itsȱ 5
auditingȱ standards.ȱ ȱ Petitioners’ȱ generalȱ challengeȱ toȱ theȱ Boardȱ isȱ 6
collateralȱ toȱ anyȱ Commissionȱ ordersȱ orȱ rulesȱ fromȱ whichȱ reviewȱ 7
mightȱbeȱsought.”).ȱȱItȱmadeȱnoȱreferenceȱtoȱtheȱproceduralȱaspectsȱ 8
ofȱtheȱclaim.ȱ 9
II. Elginȱv.ȱDepartmentȱofȱTreasuryȱ 10
Theȱ thirdȱ caseȱ inȱ whichȱ theȱ Supremeȱ Courtȱ addressedȱ theȱ 11
Thunderȱ Basinȱ factorsȱ wasȱElginȱ v.ȱ Departmentȱ ofȱ Treasury,ȱ 132ȱ S.ȱCt.ȱ 12
2126ȱ (2012).ȱ ȱ Theȱ majorityȱ concludesȱ thatȱ theȱ Elginȱ Courtȱ 13
considerablyȱ alteredȱ theȱ “whollyȱ collateral”ȱ andȱ “outsideȱ theȱ 14
agency’sȱexpertise”ȱfactors,ȱbutȱIȱdisagree.ȱȱIȱbelieveȱtheȱoutcomeȱinȱ 15

-- 47 of 65 --

8ȱ

Elginȱwasȱnotȱproducedȱbyȱvaryingȱthoseȱfactors,ȱbutȱbyȱtheȱdifferentȱ 1
typeȱofȱconstitutionalȱclaimȱpresented.ȱȱȱ 2
InȱElgin,ȱtheȱplaintiffsȱchallengedȱtheirȱdismissalȱfromȱfederalȱ 3
employmentȱforȱfailureȱtoȱcomplyȱwithȱtheȱMilitaryȱSelectiveȱServiceȱ 4
Actȱ byȱ notȱ registeringȱ forȱ theȱ draft.ȱ ȱ Althoughȱ theȱ plaintiffsȱ hadȱ 5
availableȱ toȱ themȱ theȱ rightȱ toȱ challengeȱ theirȱ dismissalsȱ throughȱ 6
administrativeȱ hearingsȱ beforeȱ theȱ Meritȱ Systemsȱ Protectionȱ Boardȱ 7
(“MSPB”)ȱandȱsubsequentȱjudicialȱreviewȱinȱtheȱFederalȱCircuit,ȱtheyȱ 8
insteadȱ broughtȱ suitȱ inȱ federalȱ districtȱ court.2ȱ ȱ Theirȱ constitutionalȱ 9
argumentsȱ wereȱ thatȱ theȱ Selectiveȱ Serviceȱ Actȱ discriminatesȱ onȱ theȱ 10
basisȱ ofȱ sexȱ byȱ requiringȱ onlyȱ malesȱ toȱ registerȱ andȱ isȱ aȱ billȱ ofȱ 11
attainder.ȱȱId.ȱatȱ2131.ȱȱNotably,ȱtheȱplaintiffsȱmadeȱnoȱchallengeȱtoȱ 12
theȱ availableȱ administrativeȱ process;ȱ theyȱ arguedȱ onlyȱ thatȱ theȱ 13
substanceȱ ofȱ theȱ lawsȱ beingȱ enforcedȱ againstȱ them—lawsȱ routinelyȱ 14
administeredȱbyȱtheȱMSPB—wasȱunconstitutional.ȱȱUnsurprisingly,ȱ 15

2 One of the plaintiffs did pursue remedies through the MSPB, but declined to appeal the decision
he received within the administrative system, instead joining the others in their suit in district
court. Elgin, 132 S. Ct. at 2131.

-- 48 of 65 --

9ȱ

then,ȱ theȱ Supremeȱ Court’sȱ analysisȱ ofȱ theȱ “whollyȱ collateral”ȱ andȱ 1
“outsideȱ ofȱ theȱ agency’sȱ expertise”ȱ factors,ȱ andȱ itsȱ conclusionȱ thatȱ 2
thoseȱ twoȱ factorsȱ inȱ Elginȱ weighedȱ inȱ favorȱ ofȱ dismissalȱ ofȱ theȱ 3
districtȱcourtȱaction,ȱwasȱnecessarilyȱquiteȱdifferentȱfromȱthatȱinȱFreeȱ 4
Enterprise.ȱ 5
Theȱ Supremeȱ Court’sȱ applicationȱ ofȱ theȱ “whollyȱ collateral”ȱ 6
factorȱ rejectedȱ theȱ plaintiffs’ȱ argumentȱ thatȱ theirȱ constitutionalȱ 7
claimsȱhadȱ“nothingȱtoȱdo”ȱwithȱtheȱ“dayȬtoȬdayȱpersonnelȱactionsȱ 8
adjudicatedȱbyȱtheȱMSPB.”ȱȱId.ȱatȱ2139.ȱȱTheȱSupremeȱCourtȱpointedȱ 9
outȱthatȱaȱchallengeȱtoȱdismissalȱfromȱemploymentȱbasedȱonȱfederalȱ 10
statutesȱ isȱ “preciselyȱ theȱ typeȱ ofȱ personnelȱ actionȱ regularlyȱ 11
adjudicatedȱ byȱ theȱ MSPBȱ andȱ theȱ Federalȱ Circuitȱ withinȱ theȱ [Civilȱ 12
ServiceȱReformȱActȱ(“CSRA”)]ȱscheme.”ȱȱId.ȱatȱ2140.ȱȱWhetherȱorȱnotȱ 13
thatȱparticularȱchallengeȱinvolvedȱaȱconstitutionalȱquestion,ȱitȱwas— 14
inȱtheȱwordsȱofȱtheȱSupremeȱCourt—“aȱchallengeȱtoȱCSRAȬcoveredȱ 15

-- 49 of 65 --

10ȱ

employmentȱactionȱbroughtȱbyȱCSRAȬcoveredȱemployeesȱrequestingȱ 1
reliefȱthatȱtheȱCSRAȱroutinelyȱaffords.”ȱȱId.ȱȱ 2
Theȱ majorityȱ hereȱ concludesȱ thatȱ Elginȱ heldȱ thatȱ “aȱ claimȱ isȱ 3
notȱ whollyȱ collateralȱ ifȱ itȱ hasȱ beenȱ raisedȱ inȱ responseȱ to,ȱ andȱ soȱ isȱ 4
procedurallyȱ intertwinedȱ with,ȱ anȱ administrativeȱ proceeding,”ȱ 5
Majorityȱ Op.ȱ atȱ 27,ȱ pointingȱ toȱ theȱ Supremeȱ Court’sȱ statementȱ thatȱ 6
theȱ constitutionalȱ claimsȱ inȱ Elginȱ wereȱ “theȱ vehicleȱ byȱ whichȱ [theȱ 7
petitioners]ȱs[ought]ȱtoȱreverseȱtheȱremovalȱdecisions”ȱmadeȱagainstȱ 8
them,ȱid.ȱatȱ2139.ȱȱHowever,ȱthatȱoverstatesȱwhatȱtheȱSupremeȱCourtȱ 9
didȱ inȱ itsȱ applicationȱ ofȱ thatȱ factor.ȱ ȱ Thatȱ portionȱ ofȱ theȱ opinionȱ 10
meantȱnothingȱmoreȱthanȱthatȱtheȱplaintiffsȱwereȱchallengingȱactionsȱ 11
againstȱthemȱunderȱtheȱstatutesȱcommittedȱtoȱtheȱMSPBȱbyȱattackingȱ 12
theȱconstitutionalityȱofȱthoseȱveryȱstatutes—itȱdoesȱnotȱsuggestȱthatȱ 13
noȱ challengeȱ thatȱ wouldȱ endȱ ongoingȱ proceedingsȱ couldȱ beȱ 14
consideredȱ collateralȱ toȱ aȱ statute’sȱ reviewȱ provisions.ȱ ȱ Suchȱ anȱ 15
interpretationȱwouldȱswallowȱtheȱrule,ȱforȱthereȱwouldȱnoȱlongerȱbeȱ 16

-- 50 of 65 --

11ȱ

anyȱ needȱ toȱ evaluateȱ theȱ substanceȱ ofȱ aȱ claimȱ asȱ longȱ asȱ theȱ claimȱ 1
couldȱ somehowȱ serveȱ toȱ endȱ administrativeȱ proceedingsȱ inȱ aȱ 2
plaintiff’sȱ favor.ȱ ȱ Thisȱ isȱ inconsistentȱ withȱ Thunderȱ Basinȱ andȱ Freeȱ 3
Enterpriseȱ (and,ȱ inȱ fact,ȱ withȱ Elgin,ȱ whichȱ lookedȱ carefullyȱ atȱ theȱ 4
substanceȱ ofȱ theȱ challenge).ȱ ȱ Itȱ wouldȱ alsoȱ turnȱ theȱ factorȱ intoȱ anȱ 5
easy,ȱbinaryȱquestion:ȱIsȱaȱproceedingȱongoing?ȱȱIfȱyes,ȱthenȱnoȱclaimȱ 6
thatȱwouldȱendȱtheȱproceedingȱcanȱbeȱwhollyȱcollateral.ȱȱThisȱcannotȱ 7
beȱ whatȱ theȱ Elginȱ Courtȱ intended.ȱ ȱ Inȱ myȱ view,ȱ itȱ heldȱ onlyȱ thatȱ aȱ 8
claimȱinvolvingȱtheȱsubstanceȱofȱtheȱveryȱactȱentrustedȱtoȱtheȱagencyȱ 9
forȱimplementationȱandȱrequestingȱtheȱtypesȱofȱreliefȱthatȱtheȱagencyȱ 10
regularlyȱ gives—aȱ farȱ cryȱ fromȱ theȱ presentȱ case,ȱ whereȱ theȱ 11
constitutionalȱ claimȱ hasȱ noȱ relationȱ toȱ theȱ securitiesȱ lawsȱ entrustedȱ 12
toȱtheȱSECȱandȱtheȱrequestedȱremedyȱofȱdisallowingȱtheȱproceedingsȱ 13
beforeȱ theȱ ALJȱ isȱ obviouslyȱ notȱ aȱ routineȱ outcome—cannotȱ beȱ 14
consideredȱ“whollyȱcollateral”ȱtoȱtheȱadministrativeȱscheme.ȱ 15

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Asȱ forȱ theȱ “outsideȱ theȱ agency’sȱ expertise”ȱ factor,ȱ theȱ Elginȱ 1
Courtȱmadeȱclearȱthatȱthisȱfactorȱwouldȱweighȱagainstȱjurisdictionȱinȱ 2
casesȱwhereȱaȱclaimȱneedingȱagencyȱexpertiseȱwasȱaȱ“threshold”ȱorȱ 3
“preliminaryȱquestion”ȱthatȱwouldȱ“obviateȱtheȱneedȱtoȱaddressȱtheȱ 4
constitutionalȱchallenge.”ȱȱId.ȱatȱ2140.ȱȱThisȱdescribedȱtheȱsituationȱinȱ 5
Elgin,ȱ whereȱ beforeȱ decidingȱ thatȱ theȱ Selectiveȱ Serviceȱ Actȱ wasȱ 6
unconstitutionalȱ theȱ MSPBȱ hadȱ toȱ decideȱ “thresholdȱ questions”ȱ toȱ 7
whichȱ theȱ MSPBȱ couldȱ applyȱ itsȱ expertise,ȱ suchȱ asȱ whetherȱ 8
constructiveȱ dischargeȱ occurredȱ asȱ wellȱ asȱ whetherȱ additionalȱ 9
claimedȱviolationsȱofȱemploymentȱstatutesȱtookȱplace,ȱwhichȱ“mightȱ 10
fullyȱdisposeȱofȱtheȱcase.”ȱȱId.ȱȱThoseȱdecisionsȱcouldȱbeȱinformedȱbyȱ 11
itsȱ agencyȱ expertiseȱ inȱ theȱ areaȱ ofȱ employmentȱ law.ȱ ȱ Id.ȱ ȱ Inȱ suchȱ aȱ 12
context,ȱ theȱ MSPB’sȱ expertiseȱ couldȱ properlyȱ beȱ “broughtȱ toȱ bear”ȱ 13
onȱ theȱ constitutionalȱ claim.ȱ ȱ Id.ȱ (quotingȱ Thunderȱ Basin,ȱ 510ȱ U.S.ȱ atȱ 14
214–15).ȱ ȱ Theȱ majorityȱ hereȱ acknowledgesȱ thatȱ anȱ issueȱ ofȱ federalȱ 15
jurisdictionȱ orȱ theȱ appropriateȱ compositionȱ ofȱ anȱ adjudicatoryȱ 16

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body—suchȱasȱtheȱAppointmentsȱClauseȱchallengeȱpresentedȱinȱthisȱ 1
case—logicallyȱprecedesȱaȱmeritsȱadjudication;ȱtherefore,ȱthereȱisȱnoȱ 2
“threshold”ȱorȱ“preliminary”ȱquestionȱthatȱwouldȱ“obviateȱtheȱneedȱ 3
toȱaddressȱtheȱconstitutionalȱchallenge.”ȱȱ 4
Theȱ majorityȱ nonethelessȱ concludesȱ thatȱ theȱ Elginȱ Courtȱ 5
interpretedȱ thisȱ factorȱ toȱ meanȱ thatȱ “anȱ agencyȱ mayȱ bringȱ itsȱ 6
expertiseȱ toȱ bearȱ onȱ aȱ constitutionalȱ claimȱ indirectly,ȱ byȱ resolvingȱ 7
accompanying,ȱ potentiallyȱ dispositiveȱ issuesȱ inȱ theȱ sameȱ 8
proceeding.”ȱ ȱ Majorityȱ Op.ȱ atȱ 32.ȱ ȱ Itȱ doesȱ soȱ byȱ citingȱ theȱ Elginȱ 9
Court’sȱ referenceȱ toȱ aȱ situationȱ inȱ whichȱ anȱ appealȱ involvesȱ “otherȱ 10
statutoryȱorȱconstitutionalȱclaimsȱthatȱtheȱMSPBȱroutinelyȱconsiders,ȱ 11
inȱadditionȱtoȱaȱconstitutionalȱchallengeȱtoȱaȱfederalȱstatute.”ȱȱElgin,ȱ 12
132ȱ S.ȱ Ct.ȱ atȱ 2140.ȱ ȱ Theȱ majorityȱ thusȱ concludesȱ thatȱ anȱ issueȱ toȱ 13
whichȱ anȱ agencyȱ mayȱ applyȱ itsȱ expertiseȱ needȱ onlyȱ beȱ dispositive,ȱ 14
notȱ necessarilyȱ “preliminary,”ȱ forȱ itȱ toȱ weighȱ againstȱ jurisdiction.ȱȱ 15
MajorityȱOp.ȱatȱ33Ȭ34.ȱ 16

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Thatȱ interpretationȱ doesȱ notȱ comportȱ withȱ theȱ languageȱ ofȱ 1
Elgin,ȱ however,ȱ whichȱ explicitlyȱ setȱ thatȱ descriptionȱ outȱ asȱ anȱ 2
exampleȱofȱaȱsituationȱinȱwhichȱthereȱmightȱbeȱ“thresholdȱquestions”ȱ 3
thatȱ wouldȱ allowȱ theȱ initialȱ agencyȱ reviewingȱ theȱ caseȱ toȱ notȱ reachȱ 4
theȱ constitutionalȱ question.3ȱ ȱ Norȱ wouldȱ suchȱ anȱ expansiveȱ 5
interpretationȱbeȱconsistentȱwithȱtheȱfactsȱunderlyingȱandȱtheȱsettingȱ 6
ofȱ Elgin,ȱ whereȱ theȱ potentiallyȱ dispositiveȱ issueȱ wasȱ clearlyȱ aȱ 7
“preliminary”ȱorȱ“thresholdȱquestion.”ȱ 8
ToȱreadȱElginȱasȱbroadlyȱasȱtheȱmajorityȱdoesȱwouldȱmeanȱthatȱ 9
asȱ longȱ asȱ aȱ proceedingȱ isȱ ongoing,ȱ theȱ “outsideȱ theȱ agency’sȱ 10
expertise”ȱfactorȱmustȱweighȱagainstȱjurisdiction—becauseȱanyȱtimeȱ 11
aȱproceedingȱhasȱcommencedȱthereȱisȱofȱcourseȱsomeȱpossibilityȱthatȱ 12
aȱplaintiffȱmayȱprevailȱonȱtheȱmerits.ȱȱThisȱwouldȱturnȱaȱsubstantiveȱ 13

3 That paragraph in Elgin makes clear that each of the sentences cited by the majority at Majority
Op. 33 are examples of cases with “threshold questions,” not additional pathways to preclusion.
See Elgin, 132 S. Ct. at 2140 (“But petitioners overlook the many threshold questions that may
accompany a constitutional claim and to which the MSPB can apply its expertise. Of particular
relevance here, preliminary questions unique to the employment context may obviate the need to
address the constitutional challenge. For example, . . . In addition, . . . . Or, an employee’s appeal
may involve other statutory or constitutional claims that the MSPB routinely considers, in addition
to a constitutional challenge to a federal statute.” (emphases added)). The Supreme Court has
elsewhere defined a “threshold question” as one “that must be resolved . . . .before proceeding to
the merits [of another claim].” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 88–89 (1998).

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factorȱ intoȱ aȱ purelyȱ procedural—andȱ binary—one,ȱ whichȱ isȱ 1
inconsistentȱwithȱtheȱdescriptionȱofȱtheȱfactorȱinȱThunderȱBasin,ȱFreeȱ 2
Enterprise,ȱorȱElginȱitself.ȱ 3
Inȱ sum,ȱ toȱ agreeȱ withȱ theȱ majority’sȱ interpretationȱ ofȱ Elgin,ȱ 4
oneȱ mustȱ concludeȱ thatȱ theȱ Supremeȱ Courtȱ intendedȱ toȱ eliminateȱ 5
anyȱsubstantiveȱanalysisȱofȱtheȱ“whollyȱcollateral”ȱandȱtheȱ“outsideȱ 6
theȱagency’sȱexpertise”ȱfactorsȱinȱanyȱcaseȱwhereȱanȱadministrativeȱ 7
proceedingȱ isȱ ongoing.4ȱ ȱ Toȱ theȱ contrary,ȱ Elginȱ itselfȱ engagesȱ withȱ 8
theȱ substanceȱ ofȱ theȱ precludedȱ claimsȱ inȱ aȱ wayȱ thatȱ theȱ majorityȱ 9
seemsȱtoȱbelieveȱisȱnowȱunnecessary.ȱȱȱ 10
Theȱmajority’sȱinterpretationȱalsoȱservesȱtoȱmoveȱtheȱThunderȱ 11
Basinȱfactorsȱawayȱfromȱtheirȱoriginalȱfunction,ȱwhichȱwasȱtoȱassistȱ 12
inȱ aȱ holisticȱ analysisȱ toȱ determineȱ whetherȱ itȱ isȱ “fairlyȱ discernible”ȱ 13
fromȱ aȱ “statutoryȱ scheme”ȱ thatȱ Congressȱ “hasȱ allocatedȱ initialȱ 14
reviewȱ toȱ anȱ administrativeȱ body.”ȱ Thunderȱ Basin,ȱ 510ȱ U.S.ȱ atȱ 207.ȱȱ 15

4 In fact, in Elgin, only one of the plaintiffs had initiated administrative proceedings; the others
had filed suit directly in the district court but could have initiated proceedings. Elgin, 132 S.Ct. at
2131. Consequently, the implication of the majority’s reading of Elgin is likely to be even greater
than this.

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Elginȱrecognizedȱthisȱfunction:ȱitȱengagedȱinȱanȱextensiveȱanalysisȱofȱ 1
theȱ historyȱ andȱ structureȱ ofȱ theȱ relevantȱ statutesȱ beforeȱ turningȱ toȱ 2
theȱ Thunderȱ Basinȱ factors,ȱ whichȱ itȱ referredȱ toȱ asȱ “threeȱ additionalȱ 3
factorsȱinȱarguingȱthatȱ[theȱpetitioners’]ȱclaimsȱareȱnotȱtheȱtypeȱthatȱ 4
CongressȱintendedȱtoȱbeȱreviewedȱwithinȱtheȱCSRAȱscheme.”ȱȱ132ȱS.ȱ 5
Ct.ȱatȱ2136.ȱȱȱ 6
Iȱ wouldȱ applyȱ theȱ threeȱ Thunderȱ Basinȱ factorsȱ forȱ diviningȱ 7
legislativeȱintentȱfaithfulȱtoȱThunderȱBasin,ȱFreeȱEnterpriseȱandȱElgin. 8
III. ApplicationȱofȱtheȱThunderȱBasinȱFactorsȱ 9
A. “WhollyȱCollateralȱtoȱaȱStatute’sȱReviewȱProvisions”ȱ 10
Theȱ Supremeȱ Courtȱ inȱ Freeȱ Enterpriseȱ concludedȱ thatȱ theȱ 11
constitutionalȱ claimȱ thereȱ wasȱ “whollyȱ collateral”ȱ toȱ anyȱ 12
administrativeȱ proceedingsȱ thatȱ mightȱ beȱ broughtȱ againstȱ theȱ 13
plaintiffs.ȱȱThatȱchallengeȱwasȱessentiallyȱtheȱsameȱasȱtheȱchallengeȱ 14
here:ȱ thatȱ theȱ appointmentȱ ofȱ theȱ membersȱ ofȱ theȱ PCAOBȱ byȱ theȱ 15
SECȱ violatedȱ theȱ Appointmentsȱ Clauseȱ ofȱ theȱ Constitution.ȱ ȱ Itȱ 16
explainedȱ thatȱ theȱ plaintiffs’ȱ “generalȱ challengeȱ toȱ theȱ Boardȱ isȱ 17

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‘collateral’ȱ toȱ anyȱ Commissionȱ ordersȱ orȱ rulesȱ fromȱ whichȱ reviewȱ 1
mightȱbeȱsought”ȱbecauseȱtheyȱ“objectȱtoȱtheȱBoard’sȱexistence,ȱnotȱtoȱ 2
anyȱ ofȱ itsȱ auditingȱ standards.”ȱ ȱ Freeȱ Enterprise,ȱ 561ȱ U.S.ȱ atȱ 490ȱ 3
(emphasisȱ added).ȱ ȱ Here,ȱ asȱ well,ȱ theȱ appellantsȱ objectȱ toȱ theȱ veryȱ 4
existenceȱ ofȱ SECȱ administrativeȱ proceedingsȱ conductedȱ byȱ ALJsȱ 5
whoȱ are,ȱ inȱ theirȱ view,ȱ notȱ appointedȱ inȱ accordanceȱ withȱ theȱ 6
AppointmentsȱClause.ȱȱȱ 7
Theȱmajorityȱfindsȱthatȱthisȱfactorȱweighsȱagainstȱjurisdictionȱ 8
basedȱ onlyȱ onȱ itsȱ interpretationȱ ofȱ Elgin,ȱ whichȱ Iȱ haveȱ addressedȱ 9
above.ȱ ȱ Iȱ wouldȱ rejectȱ thatȱ interpretation.ȱ ȱ Iȱ seeȱ noȱ differenceȱ 10
betweenȱ theȱ Appointmentsȱ Clauseȱ challengeȱ inȱ Freeȱ Enterpriseȱ andȱ 11
here;ȱitȱisȱcompletelyȱcollateralȱtoȱtheȱworkȱofȱtheȱPCAOBȱasȱwellȱasȱ 12
toȱ theȱ workȱ ofȱ theȱ SECȱ andȱ itsȱ ALJs.ȱ ȱ Iȱ wouldȱ findȱ thatȱ thisȱ factorȱ 13
weighsȱstronglyȱinȱfavorȱofȱjurisdiction.ȱ 14
B. “OutsideȱtheȱAgency’sȱExpertise”ȱ 15
Inȱ Freeȱ Enterprise,ȱ theȱ Supremeȱ Courtȱ explainedȱ thatȱ theȱ 16
Appointmentsȱ Clauseȱ claimȱ relatingȱ toȱ theȱ appointmentȱ ofȱ theȱ 17

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18ȱ

PCAOBȱbyȱtheȱSECȱwasȱ“outsideȱtheȱCommission’sȱcompetenceȱandȱ 1
expertise,”ȱrequiringȱnoȱunderstandingȱofȱaȱparticularȱindustryȱandȱ 2
noȱ “technicalȱ considerationsȱ ofȱ agencyȱ policy.”ȱ ȱ Id.ȱ atȱ 491ȱ (internalȱ 3
quotationȱ marksȱ andȱ alterationsȱ omitted).ȱ ȱ Theȱ sameȱ conclusionȱ 4
appliesȱ toȱ theȱ Appointmentsȱ Clauseȱ issueȱ here.ȱ ȱ Likeȱ theȱ 5
determinationȱ ofȱ theȱ appointmentȱ authorityȱ forȱ theȱ PCAOBȱ 6
membersȱ inȱ Freeȱ Enterprise,ȱ theȱ SECȱ hasȱ noȱ particularȱ expertiseȱ inȱ 7
determiningȱ whetherȱ theȱ systemȱ ofȱ appointingȱ itsȱ Administrativeȱ 8
Lawȱ Judgesȱ comportsȱ withȱ theȱ Appointmentsȱ Clauseȱ ofȱ theȱ 9
Constitution.ȱȱȱ 10
Theȱ majorityȱ agreesȱ asȱ farȱ asȱ Freeȱ Enterpriseȱ goes,ȱ concludingȱ 11
onlyȱ thatȱ thisȱ Thunderȱ Basinȱ factorȱ hasȱ beenȱ changedȱ byȱ Elgin.ȱ ȱ Forȱ 12
theȱ reasonsȱ discussedȱ above,ȱ Iȱ disagree.ȱ ȱ Iȱ seeȱ noȱ differenceȱ inȱ theȱ 13
applicationȱ ofȱ thisȱ factorȱ hereȱ toȱ theȱ SECȱ andȱ itsȱ applicationȱ toȱ theȱ 14
SECȱ inȱ Freeȱ Enterprise.ȱ ȱ Iȱ wouldȱ findȱ thatȱ thisȱ factorȱ alsoȱ weighsȱ 15
stronglyȱinȱfavorȱofȱjurisdiction.ȱ 16

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C. ȱ“MeaningfulȱJudicialȱReview”ȱ 1
Theȱ “meaningfulȱ judicialȱ review”ȱ factorȱ presentsȱ theȱ onlyȱ 2
significantȱdifferenceȱbetweenȱtheȱpresentȱcaseȱandȱFreeȱEnterprise.ȱȱIȱ 3
agreeȱ withȱ theȱ majorityȱ thatȱ thisȱ factorȱ tendsȱ toȱ weighȱ inȱ favorȱ ofȱ 4
preclusionȱ becauseȱ aȱ subsequentȱ appealȱ toȱ thisȱ Courtȱ followingȱ aȱ 5
finalȱCommissionȱorderȱisȱavailable.ȱ 6
Nonetheless,ȱ Iȱ doȱ notȱ believeȱ thatȱ theȱ differenceȱ betweenȱ theȱ 7
availableȱ judicialȱ reviewȱ inȱ Freeȱ Enterpriseȱ andȱ inȱ thisȱ caseȱ isȱ soȱ 8
significantȱ asȱ toȱ justifyȱ aȱ differentȱ outcome,ȱ givenȱ theȱ identicalȱ 9
applicationȱofȱtheȱotherȱtwoȱfactors,ȱasȱwellȱasȱaȱsubstantialȱquestionȱ 10
asȱ toȱ whetherȱ subsequentȱ judicialȱ reviewȱ hereȱ wouldȱ beȱ 11
“meaningful.”ȱ 12
Theȱ majorityȱ isȱ correctȱ inȱ notingȱ thatȱ Freeȱ Enterpriseȱ differedȱ 13
fromȱ thisȱ caseȱ inȱ thatȱ noȱ reviewableȱ administrativeȱ orderȱ wasȱ 14
possibleȱ unlessȱ theȱ plaintiffȱ “manufactur[ed]ȱ aȱ new,ȱ tangentialȱ 15
disputeȱ thatȱ wouldȱ requireȱ aȱ Commissionȱ order.”ȱ ȱ Majorityȱ Op.ȱ ȱ atȱ 16
17.ȱ ȱ Andȱ asȱ theȱ Freeȱ Enterpriseȱ Courtȱ noted,ȱ “[w]eȱ normallyȱ doȱ notȱ 17

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20ȱ

requireȱplaintiffsȱtoȱbetȱtheȱfarmȱbyȱtakingȱtheȱviolativeȱactionȱbeforeȱ 1
testingȱ theȱ validityȱ ofȱ [a]ȱ law.”ȱ ȱ 561ȱ U.S.ȱ atȱ 490ȱ (internalȱ quotationȱ 2
marksȱandȱalterationsȱomitted).ȱ 3
Theȱ Freeȱ Enterpriseȱ situationȱ wasȱ notȱ soȱ differentȱ fromȱ theȱ 4
presentȱ oneȱ asȱ toȱ requireȱ aȱ differentȱ outcome,ȱ however.ȱ ȱ Here,ȱ theȱ 5
administrativeȱ proceedingsȱ onceȱ concludedȱ wouldȱ haveȱ ledȱ toȱ anȱ 6
orderȱ subjectȱ toȱ judicialȱ review—butȱ onlyȱ ifȱ theȱ appellantsȱ hadȱ 7
continuedȱlitigatingȱbeforeȱtheȱSECȱALJȱandȱlostȱonȱtheȱmerits.5ȱȱȱ 8
Forcingȱ theȱ appellantsȱ toȱ awaitȱ aȱ finalȱ Commissionȱ orderȱ 9
beforeȱ theyȱ mayȱ assertȱ theirȱ constitutionalȱ claimȱ inȱ aȱ federalȱ courtȱ 10
meansȱthatȱbyȱtheȱtimeȱtheȱdayȱforȱjudicialȱreviewȱcomes,ȱtheyȱwillȱ 11
alreadyȱhaveȱsufferedȱtheȱinjuryȱthatȱtheyȱareȱattemptingȱtoȱprevent.ȱȱ 12
Theȱ majorityȱ findsȱ thatȱ theȱ “litigant’sȱ financialȱ andȱ emotionalȱ costsȱ 13

5Given that the vast majority of all SEC administrative proceedings end in settlements rather than
in actual decisions, it might well be that choosing to litigate is, in fact, equivalent to “betting the
farm.” See Brian Mahoney, SEC Could Bring More Insider Trading Cases In-House, LAW360
(June 11, 2014), http://www.law360.com/articles/547183/sec-could-bring-more-insider-trading-
cases-in-house (quoting Andrew Ceresney, the head of the SEC's Division of Enforcement, as
explaining that the “vast majority of our cases settle,” and stating, “I will tell you that there have
been a number of cases in recent months where we have threatened administrative proceedings, it
was something we told the other side we were going to do and they settled”).

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inȱ litigatingȱ theȱ initialȱ proceedingȱ areȱ simplyȱ theȱ priceȱ ofȱ 1
participatingȱinȱtheȱAmericanȱlegalȱsystem,”ȱMajorityȱOp.ȱatȱ22,ȱbutȱ 2
theȱissueȱisȱlessȱtheȱcostsȱandȱburdenȱofȱlitigationȱandȱmoreȱthatȱtheȱ 3
appellantsȱareȱchallengingȱtheȱveryȱexistenceȱofȱtheȱALJsȱasȱaȱpartȱofȱ 4
theȱ statutoryȱ scheme.ȱ ȱ Theȱ appellantsȱ seekȱ toȱ enjoinȱ theȱ SECȱ 5
proceedings,ȱbutȱbyȱtheȱtimeȱthatȱtheyȱaccessȱanyȱjudicialȱreview,ȱtheȱ 6
proceedingsȱwillȱbeȱcomplete,ȱrenderingȱtheȱpossibilityȱofȱobtainingȱ 7
anȱinjunctionȱmootȱevenȱifȱtheȱfinalȱCommissionȱorderȱisȱvacated.ȱȱInȱ 8
myȱ view,ȱ thisȱ diminishesȱ theȱ weightȱ ofȱ thisȱ factor,ȱ forȱ whileȱ thereȱ 9
mayȱ beȱ review,ȱ itȱ cannotȱ beȱ consideredȱ trulyȱ “meaningful”ȱ atȱ thatȱ 10
point.ȱȱȱ 11
Theȱmajorityȱcitesȱaȱnumberȱofȱdecisionsȱforȱtheȱprincipleȱthatȱ 12
“postȬproceedingȱ reliefȱ.ȱ.ȱ.ȱsufficesȱ toȱ vindicateȱ theȱ litigant’sȱ 13
constitutionalȱ claim,”ȱ Majorityȱ Op.ȱ atȱ 21–22,ȱ butȱ noneȱ involvesȱ anȱ 14
analysisȱ ofȱ theȱ “meaningfulȱ judicialȱ review”ȱ prongȱ ofȱ thisȱ test.ȱȱ 15
Germainȱ v.ȱ Connecticutȱ Nationalȱ Bank,ȱ 930ȱ F.2dȱ 1038,ȱ 1040ȱ (2dȱ Cir.ȱ 16

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22ȱ

1991)ȱ involvedȱ anȱ interlocutoryȱ appealȱ ofȱ theȱ denialȱ ofȱ aȱ juryȱ trialȱ 1
demandȱ inȱ aȱ bankruptcyȱ proceedingȱ andȱ theȱ applicationȱ ofȱ theȱ 2
collateralȱ orderȱ doctrineȱ exceptionȱ thatȱ anȱ orderȱ beȱ “effectivelyȱ 3
unreviewableȱ onȱ appeal.”ȱ ȱ ȱ DȇIppolitoȱ v.ȱ Americanȱ Oilȱ Co.,ȱ 401ȱ F.2dȱ 4
764,ȱ 765ȱ (2dȱ Cir.ȱ 1968)ȱ addressedȱ theȱ questionȱ ofȱ whetherȱ anȱ orderȱ 5
byȱaȱdistrictȱcourtȱtransferringȱanȱantitrustȱactionȱtoȱanotherȱdistrictȱ 6
wasȱaȱ“finalȱjudgment”ȱunderȱ28ȱU.S.C.ȱ§ȱ1291.ȱȱInȱreȱalȬNashiri,ȱ791ȱ 7
F.3dȱ 71,ȱ 79ȱ (D.C.ȱ Cir.ȱ 2015),ȱ addressedȱ theȱ “irreparableȱ injury”ȱ testȱ 8
meritingȱ theȱ grantȱ ofȱ aȱ writȱ ofȱ mandamusȱ toȱ stopȱ aȱ militaryȱ 9
commissionȱtrial.ȱȱAndȱFTCȱv.ȱStandardȱOilȱCo.ȱofȱCalifornia,ȱ449ȱU.S.ȱ 10
232,ȱ244ȱ(1980)ȱconcernedȱwhetherȱtheȱissuanceȱofȱaȱcomplaintȱbyȱtheȱ 11
FederalȱTradeȱCommissionȱcausedȱ“irreparableȱinjury”ȱallowingȱforȱ 12
judicialȱreviewȱorȱwhetherȱfinalȱagencyȱactionȱwasȱnecessary.ȱ 13
Whenȱitȱcomesȱtoȱtheȱ“meaningfulȱjudicialȱreview”ȱfactor,ȱitȱisȱ 14
myȱ viewȱ thatȱ weȱ needȱ lookȱ noȱ furtherȱ thanȱ Freeȱ Enterpriseȱ itselfȱ toȱ 15
understandȱ thatȱ beingȱ forcedȱ toȱ undergoȱ anȱ allegedlyȱ 16

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23ȱ

unconstitutionalȱ proceedingȱ mayȱ playȱ intoȱ theȱ analysisȱ ofȱ whetherȱ 1
judicialȱ reviewȱ isȱ “meaningful.”ȱ ȱ Theȱ Courtȱ inȱ Freeȱ Enterpriseȱ 2
identifiedȱ aȱ numberȱ ofȱ possibleȱ waysȱ thatȱ theȱ plaintiffsȱ inȱ thatȱ caseȱ 3
couldȱobtainȱreviewȱofȱtheirȱconstitutionalȱclaimsȱagainstȱtheȱboardȱ 4
(suchȱ asȱ “select[ing]ȱ andȱ challeng[ing]ȱ aȱ Boardȱ ruleȱ atȱ random”ȱ orȱ 5
“incur[ring]ȱ aȱ sanctionȱ (suchȱ asȱ aȱ sizableȱ fine)ȱ byȱ ignoringȱ Boardȱ 6
requestsȱ forȱ documentsȱ andȱ testimony,”ȱ 561ȱ U.S.ȱ atȱ 490);ȱ itȱ simplyȱ 7
decidedȱ thatȱ noneȱ ofȱ theȱ optionsȱ wereȱ reasonableȱ toȱ askȱ ofȱ theȱ 8
plaintiffsȱandȱthereforeȱnoneȱprovidedȱ“meaningful”ȱjudicialȱreview.ȱȱ 9
Id.ȱatȱ490–91.ȱȱȱ 10
Theȱ Supremeȱ Courtȱ inȱ Freeȱ Enterpriseȱ alsoȱ explainedȱ thatȱ theȱ 11
plaintiffsȱwereȱ“entitledȱtoȱdeclaratoryȱreliefȱsufficientȱtoȱensureȱthatȱ 12
theȱreportingȱrequirementsȱandȱauditingȱstandardsȱtoȱwhichȱtheyȱareȱ 13
subjectȱwillȱbeȱenforcedȱonlyȱbyȱaȱconstitutionalȱagencyȱaccountableȱtoȱtheȱ 14
Executive,”ȱandȱitȱallowedȱtheȱplaintiffsȱtoȱbringȱtheirȱclaimȱatȱaȱtimeȱ 15
whereȱnoȱadministrativeȱproceedingsȱhadȱyetȱbeenȱformallyȱbroughtȱ 16

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24ȱ

againstȱthem.ȱȱ561ȱU.S.ȱatȱ513ȱ(emphasisȱadded).ȱȱThisȱsuggestsȱthatȱ 1
theȱSupremeȱCourtȱconsidersȱtheȱveryȱprocessȱofȱenforcementȱbyȱanȱ 2
unconstitutionalȱ bodyȱ toȱ beȱ anȱ injuryȱ thatȱ canȱ beȱ relevantȱ toȱ theȱ 3
determinationȱofȱwhetherȱpostȬproceedingȱreviewȱisȱ“meaningful.”ȱ 4
IV. Conclusionȱ 5
Forȱallȱtheseȱreasons,ȱIȱamȱunpersuadedȱthatȱtheȱ“meaningfulȱ 6
judicialȱ review”ȱ prongȱ hasȱ enoughȱ weightȱ toȱ overpowerȱ theȱ otherȱ 7
twoȱfactorsȱandȱresultȱinȱaȱfindingȱofȱnoȱjurisdiction.ȱȱTheȱotherȱtwoȱ 8
factorsȱ clearlyȱ mirrorȱ thoseȱ inȱ Freeȱ Enterprise,ȱ andȱ theȱ availableȱ 9
reviewȱ isȱ notȱ meaningfulȱ enoughȱ toȱ setȱ thoseȱ twoȱ factorsȱ aside.ȱȱ 10
Thus,ȱ theȱ Appointmentsȱ Clauseȱ challengeȱ hereȱ isȱ notȱ “ofȱ theȱ typeȱ 11
Congressȱintendedȱtoȱbeȱreviewedȱwithinȱth[e]ȱstatutoryȱstructure.”6ȱȱ 12
ThunderȱBasin,ȱ510ȱU.S.ȱatȱ212.ȱȱȱ 13

6 Since the purpose of the application of the Free Enterprise factors is to determine whether
Congress intended to deprive district courts of subject-matter jurisdiction to hear pre-
administrative-adjudication claims, it seems relevant that Congress continues to authorize the SEC
to choose whether it will pursue violations before its ALJs in administrative proceedings or in the
district court as civil actions. To permit those subject to SEC enforcement actions to challenge
administrative proceedings in the district courts on the basis of constitutional challenges that have
nothing to do with the expertise of the SEC or with factual matters relevant to their own particular
circumstances would seem consistent with that Congressional intent.

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25ȱ

ȱ 1
Iȱwouldȱreverseȱtheȱdecisionȱofȱtheȱdistrictȱcourtȱandȱremandȱ 2
forȱanȱadjudicationȱofȱtheȱmeritsȱofȱtheȱAppointmentsȱClauseȱclaim.ȱ 3

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