SEC v. Cochran


Whether a federal district court, under the Securities Exchange Act of 1934, has jurisdiction over a lawsuit to adjudicate structural constitutional claims challenging Securities and Exchange Commission administrative proceedings?

Oral argument: 
November 7, 2022

This case asks the Supreme Court to decide whether a federal district court has jurisdiction over a suit in which the respondent in an ongoing Securities and Exchange Commission (“SEC”) administrative proceeding seeks to enjoin that proceeding, on account of an alleged constitutional defect in the statutes governing the removal of the overseeing administrative law judge. The SEC claims that the Court’s decision in Free Enter. Fund v. Pub. Co. Oversight Bd. specifically allows double-tenure protection for administrative law judges, that decisions in Thunder Basin Coal Co. v. Reich and Elgin v. Dep’t of the Treasury do not require Congress to provide a clear statement in order to strip district courts of jurisdiction, and that constitutional challenges to its administrative adjudications are properly addressed through the Securities Exchange Act of 1934 (“Exchange Act”) and the Administrative Procedure Act (“APA”). Michelle Cochran counters that administrative law judges should not be granted double tenure from removal because it infringes on executive branch authority, that Thunder Basin requires a clear Congressional statement stripping district courts of jurisdiction, and that the SEC’s statutory authority is insufficient to address her constitutional challenge. The Court’s holding could significantly impact the SEC’s adjudicative activities and the nature, volume, and frequency of judicial review cases more broadly.

Questions as Framed for the Court by the Parties 

Whether a federal district court has jurisdiction to hear a suit in which the respondent in an ongoing Securities and Exchange Commission administrative proceeding seeks to enjoin that proceeding, based on an alleged constitutional defect in the statutory provisions that govern the removal of the administrative law judge who will conduct the proceeding.


The Securities and Exchange Commission (“SEC”) initiated administrative proceedings against Michelle Cochran, a certified public accountant, in 2016. Cochran v. SEC at 2. The SEC claimed that Cochran violated the Exchange Act because she had allegedly failed to comply with the Public Company Accounting Oversight Board’s auditing standards. Id. at 2. Following these proceedings, an SEC administrative law judge (ALJ) found that Cochran violated the Exchange Act, and, as a result, the SEC banned Cochran from practicing accounting for five years and assessed a $22,500 civil penalty. Id. at 2. Cochran objected to this decision. Id.

Before the SEC could respond to Cochran’s objection, the United States Supreme Court decided Lucia v SEC, in which it held that SEC ALJ’s are “Officers of the United States” within the meaning of the Appointments Clause of Article II of the Constitution. Id. at 2–3. Accordingly, consistent with the clause, either the President, a court of law, or a department head must appoint SEC ALJs. Id. Since SEC staff members had appointed the ALJ in Cochran’s case, the Lucia decision led the SEC to remand Cochran’s case for a new administrative hearing in front of a different ALJ, whom the SEC appointed in a manner consistent with Article II. Id.

In 2019, Cochran brought suit in the United States District Court for the Northern District of Texas against the SEC, the SEC Chairman, and the Attorney General, seeking to block the second administrative proceeding. Id. at 3. Cochran argued that the Exchange Act’s provision stating that SEC ALJs may be removed only “for-cause” violates Article II because it renders the ALJs too “insulated” from the President’s power to remove officers. Id. The district court dismissed Cochran’s complaint for lack of subject-matter jurisdiction. Id. The district court noted that, under the Exchange Act, a claimant who wishes to challenge a final SEC order may seek judicial review of that order, after the administrative proceeding, in a federal court of appeals. Id. at 3–4.

Cochran appealed the district court’s decision to the United States Court of Appeals for the Fifth Circuit, and the Fifth Circuit enjoined the SEC’s proceedings pending resolution of the appeal. Id. at 4. The Fifth Circuit first affirmed the district court’s decision to dismiss Cochran’s complaint, but later granted a rehearing en banc and, on rehearing, affirmed the district court’s decision in part, reversed it in part, and remanded the case for further proceedings. Id. at 2, 4. Specifically on the question of whether the district court has jurisdiction to hear Cochran’s removal-power claim, a majority of the Fifth Circuit held that the district court did have jurisdiction because the Exchange Act’s judicial review provision only targets the judicial review of “final” administrative orders, and it does not address situations in which a respondent has not yet received a final order, such as Cochran’s case. Id. at 6.

The SEC petitioned the Supreme Court for a writ of certiorari, noting that the Court had granted certiorari in another pending case, Axon Enter., Inc. v. FTC, involving the same judicial review scheme question, but with respect to proceedings at the Federal Trade Commission (“FTC”). SEC Petition for a Writ of Certiorari at 6. The Court granted certiorari on May 16, 2022.



The SEC contends that tenure protections granted to ALJs are constitutional and consistent with the President’s power to remove officers. Brief for the Federal Parties, at 57. The SEC argues that Congress granted ALJs a large degree of protection from removal from their positions, unless the removal is for cause. Id. at 5657. The SEC notes that, in Free Enter. Fund v. Pub. Co. Oversight Bd., the Supreme Court found that Presidents, in order to discharge their executive authority, cannot face a double tenure situation where both the principal officer and the subordinate inferior officer enjoy for-cause removal protection. Id. at 57. The SEC, however, asserts that the Court did not decide the constitutionality of removal protection for SEC ALJs because, unlike the Public Company Accounting Board, SEC ALJs fulfill an adjudicatory role. Id. The SEC argues that removing double tenure would undermine the goal of maintaining the independence of ALJs. Id. The SEC additionally contends that Cochran’s claim of unconstitutionality does not actually affect “the proper mode and timing of judicial review.” Id. at 58. The SEC maintains that this determination is Congress’ responsibility and therefore there is no need to advance legal claims over the constitutionality of ALJs outside of an administrative adjudication. Id. The SEC states that any such claim should go to the Court of Appeals, after the end of administrative adjudication. Id. at 4243.

Cochran counters that, under Free Enter. Fund, it is an unconstitutional use of executive power to have double tenure for ALJs. Brief for Respondent, Michelle Cochran at 3435. Cochran contends that constitutional claims over double tenure are distinct from the original SEC claim brought during administrative adjudication. Id. Cochran also notes such constitutional arguments are beyond the expertise of the agency to adjudicate. Id. at 36. Cochran believes the unconstitutional nature of the ALJs creates serious harm to respondents facing administrative adjudications. Id. at 37. Accordingly, Cochran argues that the possibility of such harm requires the district court to hear the constitutional claim prior to the end of the SEC adjudication; otherwise, claimants will likely be deprived of meaningful judicial review. Id. at 37. Cochran views the ALJs tenure protection as a “structural constitutional infirmity,” which litigants often do not have the opportunity to challenge due to the pressure of settlement. Id. at 4849. The U.S. Chamber of Commerce (“Chamber of Commerce”), in support of Cochran, asserts that Cochran’s constitutional claim is outside the merits of any specific administrative proceeding and part of a much larger constitutional contestation of administrative adjudications that are shielded by double tenure from executive oversight. Brief of Amicus Curiae U.S. Chamber of Commerce, in Support of Respondent at 1213, 16.


The SEC argues that the Supreme Court’s decisions in both Thunder Basin Coal Co. v. Reich and Elgin v. Dep’t of the Treasury support the notion that Cochran’s claim is properly raised only at the conclusion of agency proceedings, consistent with “statutes that channel review to courts of appeals.” Brief for the Federal Parties, at 43. The SEC maintains that, in Thunder Basin, the Court indicated that district courts generally lack the authority to adjudicate challenges to ongoing agency proceedings. Id. at 3132. Furthermore, the SEC posits that Elgin supports the notion that there is no need for a “clear congressional statement” eliminating district court review. Id. at 3233. The SEC contends that the Court set forth the rules in Thunder Basin and Elgin because subjecting administrative adjudications to immediate judicial review would create parallel adjudication, unnecessarily duplicate review of any adjudicative agency proceeding, and generate confusion over which constitutional claims are susceptible of immediate judicial review. Id. at 44, 46. The SEC asserts that Thunder Basin and Elgin are applicable to the case at bar and that Free Enter. Fund is factually distinct from Cochran’s claim because, unlike the petitioner in Free Enter. Fund, Cochran is already subject to liability and does not need to take further action to obtain judicial review. Id. at 4041. The SEC urges that Elgin and Thunder Basin do not minimize the opportunity for judicial review of a constitutional challenge at the end of the administrative adjudication process. Id. at 5152. The SEC argues that placing the opportunity for constitutional challenges at the end of the process ensures the constitutional challenge is actually necessary, legally ripe, or worthy of judicial review, as the defendant’s claim can fully proceed through the administrative adjudication on the merits. Id.

Cochran agrees that Elgin and Thunder Basin both limited judicial review within federal district court. Brief for Respondent, at 2627. However, Cochran cites Free Enter. Fund, asserting that in cases of constitutional claims, district courts are not explicitly stripped of their authority unless there is a clear congressional statement. Id. at 27, 32. Cochran counters that the SEC and lower courts have impermissibly expanded the scope of Thunder Basin, which, she maintains, intended to protect district court jurisdiction. Id. at 43. The only exceptions to district court jurisdiction, Cochran contends, are specific statutory exceptions, and not vice-versa. Id. at 44. Cochran argues that lower courts have incorrectly interpreted meaningful judicial review to mean the possibility of “accessible” review after an adjudicatory proceeding. Id. at 45. The Institute for Justice (“IJ”), in support of Cochran, emphasizes that the primary issue is that Thunder Basin and Elgin have allowed courts to infer congressional intent to strip jurisdiction from district courts and transfer it to administrative proceedings. Brief of Amicus Curiae Institute for Justice, in Support of Respondent at 17. IJ states that to strip jurisdiction from district courts, Congress must “do so expressly, clearly, and directly in a statute’s plain text.” Id. at 1718.


The SEC claims that the only statutory authority that details the review process of administrative SEC adjudications is the Exchange Act, which states that judicial review occurs only at the appellate level after the conclusion of administrative adjudication. Brief for Federal Parties at 12. Any attempt to review earlier, the SEC elaborates, is contrary to the Administrative Procedure Act (“APA”). Id. The SEC asserts that Congress purposefully constructed this review structure to promote efficiency. Id. at 1516. The SEC emphasizes that the SEC has “exclusive review” under 15 U.S.C. § 78y of the Exchange Act, and that Congress intended to bar respondents in administrative adjudications from contesting an SEC proceeding. Id. at 21. The SEC posits that the APA allows the Exchange Act to construct an “exclusive mechanism” to review an SEC decision. Id. at 17. The SEC contends that any attempt to contest the structure of judicial review found in the Exchange Act is only allowed under the APA when a statute lacks a strong review mechanism, which is not applicable to the Exchange Act. Id. at 25.

Cochran counters that § 78y creates exclusive review of her claim because her claim has nothing to do with the final SEC adjudication, and she has not yet been subject to final adjudication. Reply of Respondent, Michelle Cochran at 67. Atlantic Legal Foundation, in support of Cochran, argues that Cochran’s constitutional claim “does not depend on the validity of any substantive aspect of the Exchange Act.” Brief of Amicus Curiae Atlantic Legal Foundation, in support of Respondent at 1314. Cochran also maintains that the APA does not apply to her claim because her argument concerns whether federal district courts have jurisdiction, which, she asserts, is not a topic within the APA’s statutory mandate. Reply of Respondent at 78. Cochran also maintains that the APA is irrelevant to her claim because it was enacted a decade after the Exchange Act provisions at issue. Id. at 8.



The SEC argues that a policy allowing for judicial review of administrative proceedings before those proceedings are finished would effectively render both the SEC and the lower courts dysfunctional by creating an overwhelming burden for the courts to provide “piecemeal” review. Brief for the Federal Parties at 50. According to the SEC, Congress purposefully constructed the existing review structure in the Exchange Act to promote efficiency and avoid overburdening the courts. Id. at 15–16. Moreover, the SEC contends that under the Exchange Act’s review structure, a court of appeals may still enjoin an SEC proceeding, albeit only under unusual circumstances, using a writ of mandamus according to the All Writs Act. Id. at 50. Thus, the SEC claims that Congress already contemplated a form of interlocutory review. Id. Therefore, the SEC argues that Congress has weighed the costs and benefits of allowing courts to interrupt administrative proceedings for review and concluded that the costs are greater than the benefits. Id.

The Chamber of Commerce, in support of Cochran, counters that a policy that withholds judicial review until after an SEC ALJ has issued a final order, does not provide the parties with meaningful judicial review. Brief of Amicus Curiae U.S. Chamber of Commerce, in Support of Respondent at 9–10. For instance, the Chamber of Commerce asserts that if a government agency imposes unconstitutional procedures on parties caught in the crosshairs of agency adjudication, the parties may suffer “irreparable harm” if they must wait until after the proceedings are complete for a court to review the constitutionality of the actions. Id. The Chamber of Commerce argues that, by the time a court of appeals hears the case, the damage will already have been done, and so the review would amount to “too little review, too late.” Id. Similarly, Americans for Prosperity Foundation, in support of Cochran, maintains that the heightened standard of deference for the SEC’s findings of fact creates a towering disadvantage for the few respondents who make it through the administrative procedures. Brief of Amicus Curiae Americans for Prosperity Foundation, in Support of Respondent at 22. Furthermore, the Cato Institute, in support of Cochran, argues that even if adjudicative efficiency was paramount, the SEC’s adjudication of complex cases is inefficient. Brief of Amicus Curiae the Cato Institute, in Support of Respondent at 6.


According to the SEC, the Constitution gives Congress the power and responsibility to create and curtail legal causes of action. Brief for the Federal Parties at 28. Thus, the SEC, quoting from the Supreme Court’s opinion in Egbert v. Boule, argues that “[w]hen Congress creates ‘a remedial process that it finds sufficient,’ ‘the courts cannot second-guess that calibration by superimposing’ a judge-made remedy.” Id. Therefore, the SEC argues that Congress has the power and responsibility to create suitable remedies for any problems with administrative proceedings. Id. at 29. The SEC claims that Congress did exactly this by creating the framework in the Exchange Act that allows a party to file a petition for review in a court of appeals once the SEC gives a final order. Id. Thus, the SEC asserts that the principle of separation of powers constrains the judicial branch, and that Congress, not the courts, has the primary responsibility for deciding the proper time and manner of judicial review. Id. at 58. The SEC emphasizes that if the Supreme Court permits judicial review before a final SEC order, it will act in a manner contrary to congressional policy decisions. Id.

IJ, in support of Cochran, counters that under Article III of the Constitution, the judicial branch has the power and duty to ensure that federal agencies operate within the structural limitations that the Constitution establishes. Brief of Amicus Curiae Institute for Justice, in Support of Respondent at 4. For example, IJ argues that inferring from an implication in a statute that Congress can deprive federal courts of jurisdiction cuts against the central purpose of the judiciary to uphold the Constitution. Id. at 3. Citizens United and Citizens United Foundation, in support of Cochran, emphasize that this judicial role is necessary because the SEC, part of the executive branch, may only exercise executive power and cannot exercise judicial power. Brief of Amici Curiae Citizens United and Citizens United Foundation, in Support of Respondent at 8.


Written by:

Zoé-Pascale de Saxe Roux

Daniel Woods

Edited by:

Renee Olivett


The authors would like to thank Professor Jeffrey J. Rachlinksi for his guidance and insights into this case.

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