Is Administrative Summary Judgment Unlawful?

94 Pages Posted: 26 Aug 2020 Last revised: 14 Jan 2021

Date Written: August 24, 2020

Abstract

When the Securities and Exchange Commission (SEC) files an administrative enforcement action, the respondent is ordinarily entitled to present their case orally at an in-person hearing before one of the agency’s Administrative Law Judges. But, in hundreds of administrative proceedings over the past 25 years, the agency has skipped over this in-person hearing, instead resolving actions on motions for “summary disposition.”

This is illegal. Most SEC administrative proceedings are governed by the Administrative Procedure Act’s (APA) provisions governing “formal” adjudications. One of those provisions – long overlooked or misinterpreted by scholars and courts – can only be reasonably interpreted as granting respondents an absolute right to an oral hearing in cases where the agency is seeking to impose “sanctions” like those the SEC imposes in administrative proceedings. The 1946 Congress that enacted the APA declined to follow the trans-substantive summary judgment rule that had been recently adopted as part of the Federal Rules of Civil Procedure, and instead followed the alternative model of the many U.S. States that permitted summary judgment only in specifically enumerated categories of cases. The legislative history and contemporaneous interpretations confirm that the APA prohibits summary process for formal adjudications leading to “sanctions.”

Administrative summary judgment is also questionable on policy grounds. Proponents argue that administrative summary judgment promotes administrative efficiency, but have overlooked how the procedure may distort agency enforcement priorities, undermine Congressional control of administrative agencies, be subject to systematic abuse by agencies, and unfairly deprive some individuals of important procedural rights.

This paper provides an empirical study of SEC summary disposition from its promulgation in 1995 through 2019, examines the text and history of the APA to demonstrate the illegality of this procedure, and challenges the conventional policy justifications for the procedure.

Keywords: SEC Enforcement, Administrative Proceedings, Administrative Adjudication

Suggested Citation

Platt, Alexander I., Is Administrative Summary Judgment Unlawful? (August 24, 2020). Harvard Journal of Law and Public Policy, Vol. 44, No. 1 (Feb. 2021 Forthcoming), Available at SSRN: https://ssrn.com/abstract=3680135

Alexander I. Platt (Contact Author)

University of Kansas School of Law ( email )

Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States

HOME PAGE: http://law.ku.edu/alexander-platt

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