Lynn Tilton, the so-called “Diva of Distressed,” has lost in her bid to have an enforcement action by the Securities and Exchange Commission against her heard in a federal court instead of an SEC administrative tribunal. On March 30, 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 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.) In holding against the respondents, the federal court did not address any substantive arguments. Instead, it solely determined that the administrative law judge proceeding and the SEC itself, in the first instance, were the appropriate forum to hear the respondents constitutional arguments. Recently, a federal court in Georgia held that an administrative proceeding by the SEC was unconstitutional and that “requiring Plaintiff to pursue his claims following the SEC’s administrative process ‘could foreclose all meaningful judicial review’ of his constitutional claims.”