The battle over the constitutionality of the SEC’s administrative forum now moves to the U.S. Eleventh Circuit. The appellate court issued an order Wednesday, denying the SEC’s bid to upset the trial court’s preliminary injunction and allow the administrative trial to go forward. Moreover, the Court consolidated two cases on the issue for expedited merits disposition, including oral argument (if held). See Gray Financial Group, Inc. v. US Securities and Exchange Comm’n, No. 15-13738-F (11th Cir. Oct. 7, 2015); Hill v. Securities and Exchange Comm’n, No. 15-12831 (11th Cir.).
In both cases, Atlanta federal judge Leigh Martin May held the SEC’s administrative proceedings “likely unconstitutional” and enjoined them from proceeding, pending full determination of the plaintiffs’ challenges.
The consolidated appeals either will create a Circuit split (if affirmed) or hasten the demise of these challenges (if reversed). In August, the Seventh Circuit rejected a challenge, holding Courts had no jurisdiction to consider the issues until an appeal from the SEC’s review of its ALJ’s initial decision. Bebo v. SEC, No. 15-1511, 2015 WL 4998489 (7th Cir. Aug. 24, 2015). A week ago the D.C. Circuit reached the same conclusion in Jarkesy v. SEC, No. 14-5196 (D.C. Cir. Sept. 29, 2015).
In the meantime, the SEC self-validated its process in In the Matter of Timbervest, LLC, IA Rel. No. 4197 (SEC Sept. 17, 2015). The Timbervest challengers may appeal to either the DC or Eleventh Circuits, so in light of Jarkesy will be looking for path forward in these two consolidated appeals before the Eleventh Circuit.
The issue also is rising through the Second Circuit from a pair of opposing results in the Tilton and Duka decisions.