Eventual Judicial Review
45 Pages Posted: 2 Oct 2017 Last revised: 26 Apr 2018
Date Written: September 30, 2017
The SEC’s recent—and controversial—choice to make more frequent use of internal enforcement actions has raised several questions. Some have asked whether the SEC has attempted to advantage itself by prosecuting in-house; others have asked whether the SEC’s internal enforcement scheme is unconstitutional. This Note asks a largely overlooked threshold question: Do—and just as importantly, should—federal district courts have parallel subject matter jurisdiction over constitutional challenges to an SEC internal proceeding while this proceeding is underway?
If exercise of parallel jurisdiction is not expressly prohibited by statute, Thunder Basin Coal Co. v. Reich instructs Article III courts to presume claims are not confined to administrative channels if (1) jurisdictional preclusion would prevent “meaningful judicial review,” (2) the suit is “wholly collateral” to a statute’s review apparatus, and (3) the claims are “outside agency expertise.” In Tilton v. SEC, a split Second Circuit panel considered an attempted parallel constitutional challenge to the SEC’s internal enforcement scheme and concluded jurisdiction was indeed precluded. In doing so, Tilton followed a line of recent cases interpreting Thunder Basin to suggest that “meaningful judicial review” is satisfied if a scheme provides any eventual judicial review.
This Note argues that this equating of meaningful and eventual judicial review under Thunder Basin unwisely limits the ability of Article III courts to monitor agency constitutionality, deprives parties of truly meaningful review, and undercuts the SEC’s legitimacy. This Note proposes two responses: Legislatively, the SEC—or ideally, Congress—should promulgate binding forum selection guidelines granting Article III courts jurisdiction over constitutional challenges to SEC proceedings; doctrinally, Article III courts should employ standard injunction analysis, exercising jurisdiction over constitutional claims and gauging their likelihood of success on the merits.
JEL Classification: K23
Suggested Citation: Suggested Citation