The United States Court of Appeals in New York upheld a lower court decision that dismissed a challenge by Lynn Tilton (the so-called “Diva of Distressed”) to the administrative judicial process of the Securities and Exchange Commission. In April 2015, the SEC commenced administrative proceedings against Ms. Tilton, and companies she owns and controls claiming that, since 2003, the respondents misled investors about the declining value of assets in collateralized loan obligation funds they managed. In response, the respondents filed a lawsuit against the SEC in federal court in New York City seeking to enjoin the agency from proceeding with the administrative proceeding, and instead require it to proceed against respondents in a federal court. Among other things, the respondents claimed that the SEC process for appointing and removing administrative law judges violated the so-called “Appointments Clause” of the US Constitution. (Click here for further details on the SEC case against Ms. Tilton in the article, “SEC Charges Investment Advisers and Owner of Misleading Investors in Funds Regarding the Poor Performance of Underlying Assets; Respondents Sue SEC Right Back” in the April 5, 2015, edition of Bridging the Week.) The court dismissed Ms. Tilton’s lawsuit, holding that the administrative law judge proceeding and the SEC itself, in the first instance, were the appropriate forum to hear the respondents’ constitutional arguments. The US Court of Appeals upheld the lower court’s decision, saying that under relevant law, “Congress implicitly precluded federal district court jurisdiction over the appellants’ constitutional challenge.” The Court of Appeals ruled that Ms. Tilton’s Appointments Clause challenge should be handled through the SEC’s administrative law regime “and could reach a federal court only on petition for review of a final decision by the Commission.” If Ms. Tilton loses her action before an administrative tribunal she may petition for a new consideration before the Commission, and the party that loses there may seek review by a federal court of appeals. (Click here for details on the lower court’s decision in the article, “Diva of Distressed Loses Bid to Have SEC Enforcement Action Heard in Federal Court, Not Administrative Tribunal” in the July 5, 2015 edition of Bridging the Week.)