The United States District Court for the Northern District of Georgia, Atlanta Division, entered a preliminary injunction preventing the SEC from conducting an administrative proceeding in an insider trading matter. In the Hill case, the Court found the plaintiff has a substantial likelihood of success on the merits of his claim that the SEC administrative proceeding violates the Appointments Clause of the United States Constitution.
In Hill the ruling, the Court noted the matter could be easily cured by having the SEC Commissioners issue an appointment or preside over the matter themselves.
In a subsequent filing, the SEC stated it intends to ask the Court to stay the proceedings so that it can appeal the Court’s ruling. According to the SEC, “any further proceedings in this Court could prove largely superfluous and a waste of the parties’ and the Court’s resources.”
Now, in a separate case in which the same issue has arisen, the Department of Justice informed the United States District Court for the Southern District of New York that:
“Because appellate guidance on the propriety of the Hill injunction may be forthcoming if the Solicitor General approves the appeal, the government believes that the Commission should not act precipitously to modify its ALJ scheme. This is particularly the case when the SEC has over 100 litigated proceedings at various stages of the administrative process and the ALJ scheme has been in use for seven decades and is grounded in a highly-regulated competitive service system that Congress created for the selection, hiring and appointment of ALJs in the Executive Branch.”
Finally, the Gray Financial case, which presents issues identical to the Hill case, has been transferred to the same judge that issued the preliminary injunction in Hill. That judge has scheduled a hearing on a preliminary injunction for July 13 in the Gray Financial case.