Last week, in Ironridge Global IV, Ltd., et al. v. SEC, No. 15-cv-2512, U.S. District Court Judge Leigh Martin May issued her third well-reasoned decision concluding that SEC Administrative Law Judges (“ALJs”) are “inferior officers” and are “likely unconstitutional” under the Appointments Clause of Article II, preliminarily enjoining the SEC administrative proceeding against the plaintiffs. The Ironridge Order is available here. Before reaching the merits, Judge May found, as she previously did in the Gray and Hill cases, that the district court has subject matter jurisdiction to consider the plaintiffs’ constitutional challenges. Gray v. SEC, No. 15-cv-0492 (N.D. Ga. Aug. 4, 2015) and Hill v. SEC, No. 15-cv-1801, 2015 WL 4307088, -- F. Supp. 3d -- (N.D. Ga. June 8, 2015). The orders in all three cases included over 100 different citations to authorities and resulted in injunctions against SEC administrative proceedings as unconstitutional on Appointments Clause grounds. The SEC appealed Gray and Hill to the 11th Circuit U.S. Court of Appeals, and a consolidated oral argument is set for the week of Feb. 22, 2016.
But perhaps the most significant aspect of Judge May’s Ironridge Order is her ruling on venue. Ironridge sued in the Northern District of Georgia, although the plaintiffs do not reside there, and by all appearances the case lacks any significant connection to that District. Presumably, the Ironridge plaintiffs sued there because Judge May has led the way in issuing injunctions in such cases, notwithstanding the never-say-die approach by the SEC in attacking them. The SEC opposed venue in Ironridge, but Judge May correctly concluded that venue was proper because the SEC "resides" in that District under the applicable venue statute. (Ironridge Order, pp. 26-31.) The venue provision for federal defendants states that an action against a federal agency may “be brought in any judicial district in which  a defendant in the action resides … .” 28 U.S.C. § 1391(e)(1)(A). Effective January 2012, Congress amended § 1391 to specify that “for all venue purposes” “an entity with the capacity to sue and be sued in its common name … shall be deemed to reside” in any district where that entity “is subject to the court’s personal jurisdiction with respect to the civil action in question … .” 28 U.S.C. § 1391(c)(2). The court rejected the SEC’s contention that § 1391(c) was not intended to apply to federal agencies. Employing traditional tools of statutory construction, the court found that “the plain and ordinary meaning” of § 1391(c) applies to the SEC. (Ironridge Order, p. 29.) Because the SEC is an entity that can “sue or be sued in its common name,” Judge May ruled that the SEC’s residency is set in any district where it “is subject to the court’s personal jurisdiction.” (Id.)
Although federal court venue decisions may not attract a lot of attention, this one should. It means that any current or potential respondent in an SEC administrative proceeding who wants to halt an administrative proceeding from going forward may want to consider bringing an Article II challenge case in the Northern District of Georgia. Indeed, the court has directed that these cases be assigned to Judge May as related cases, in the interest of judicial economy. See Gray, No. 15-cv-0492 (N.D. Ga. June 10, 2015). If venue is now proper in that District, and Judge May already agrees that SEC administrative proceedings should be enjoined on constitutional grounds, why would a would-be challenger go anywhere else?