Washington, DC (June 5, 2023) — The U.S. Securities and Exchange Commission (SEC) dismissed dozens of enforcement cases Friday, including two involving current NCLA clients (Michelle Cochran, Marian Young) and one of a former client (Christopher Gibson). The agency revealed on June 2, 2023, that members of its enforcement staff had gained illicit access to confidential adjudicative documents and downloaded them in far more cases than originally reported, exposing rot in a hopelessly compromised in-house adjudication regime.

SEC publicly admitted in April 2022 to the existence of a so-called control deficiency within its administrative adjudication system. It said the agency’s Chair had launched an internal review of the issue (using a contractor dependent on staying in SEC’s good graces for its other agency business). At that time, the agency specifically divulged that SEC Division of Enforcement personnel had accessed adjudication material in the SEC v. Cochran case, temporarily making the material available to everyone in the Division, including attorneys who prosecuted Ms. Cochran on SEC’s behalf. Now it turns out agency personnel had done the same thing in dozens more cases.

NCLA filed a federal court Complaint in November 2022, alleging that SEC failed to comply with FOIA requests, denying access to records concerning this same “control deficiency.” On Friday, SEC announced its discretionary decision to dismiss more than 40 pending enforcement cases connected to the egregious problem. SEC said it dismissed the cases to conserve agency resources, but it appears to be trying to avoid scrutiny of its misconduct.

In April 2023, Ms. Cochran won her argument before the U.S. Supreme Court that she had the right to challenge the constitutionality of her Administrative Law Judge’s (ALJ) removal protections in federal court before undergoing an administrative adjudication. This landmark ruling was a major victory for NCLA—and a major blow to SEC and to administrative adjudication generally. It freed Americans, many of whom had been trapped in interminable regulatory purgatory, to seek relief in federal court from these ersatz proceedings where the agency is prosecutor, judge, jury and first court of appeal. Now, rather than defend against allegations of unconstitutionality before real judges in real federal courtrooms, SEC has waved the white flag. This decision demonstrates just how significant the Cochran victory was. When forced to defend its unconstitutional conduct in front of Article III judges, SEC cannot. Indeed, it will not even try.

NCLA also filed a mandamus petition in April on behalf of Ms. Young and her company, asking the U.S. Court of Appeals for the Fifth Circuit to issue an order compelling the SEC Commissioners in In re Marian P. Young and Saving2Retire, LLC to either dismiss the case or else promptly decide the appeal in the agency’s eight-year-old administrative matter. Rather than await the Fifth Circuit’s ruling on NCLA’s mandamus petition, SEC has now abandoned its administrative case against Ms. Young as well.

Finally, in January 2021, the Supreme Court denied NCLA’s petition for a writ of certiorari in the case of Mr. Gibson. His first hearing before an unconstitutional SEC ALJ for allegedly violating securities laws was nullified following the court’s 2018 Lucia v. SEC decision, but the agency subjected him to a second hearing before another defective ALJ. Immediately after the Cochran decision, Gibson sued in federal district court to vindicate his constitutional rights. SEC’s strategic dismissals seek to deny Cochran, Young, and Gibson their day in court.

Despite its calculated decision to dismiss these cases, SEC must be held to account. NCLA will continue its efforts against the agency’s unconstitutional administrative proceedings system.

NCLA released the following statements:

“This is a strategic retreat by the SEC—a desperate attempt to avoid accountability for denying jury rights and spying on ALJs.”
— Philip Hamburger, Chief Executive Officer and Founder of NCLA

“SEC’s unprecedented dismissal of dozens of enforcement cases is a cynical ploy by the agency to avoid scrutiny of two things. First, SEC seeks to avoid creating precedent in some of these cases that would very likely hold that much of what SEC does in adjudications violates the Constitution. Second, SEC hopes to dodge further inquiry into its so-called control deficiency, which was not a fluke but rather the predictable consequence of locating prosecutorial and adjudicative functions in the same body. While dismissing these cases may slow down the reckoning that is coming for unconstitutional adjudication at the SEC and across the Administrative State, the reckoning is still coming. NCLA will accelerate our litigation plans to make sure of that.”
— Mark Chenoweth, President and General Counsel, NCLA

“Seven short weeks after the Supreme Court decision in Axon/Cochran, SEC just dismissed scores of cases that have been pending before the agency for years. This is undoubtedly because the Axon/Cochran decision threw open federal courthouse doors to provide sunlight and justice for constitutional challenges that Justice Kagan called “fundamental, even existential,” in her unanimous decision. SEC may hope that this gamesmanship will silence Michelle Cochran and other defendants from vindicating their rights to be tried in an Article III court, before a jury, with the full procedural and substantive guarantees promised in the Constitution. But this sweeping attempt to prevent delegitimization of agency adjudication will not avail. Axon/Cochran applies across agencies and in future actions where NCLA plans to continue to expose and put an end to the constitutional defects of agency adjudication.”
— Peggy Little, Senior Litigation Counsel, NCLA

For more information visit these case pages.

ABOUT NCLA 

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

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Washington, DC (January 11, 2021) – The U.S. Supreme Court today denied a petition for writ of certiorari in the case of NCLA client Christopher Gibson. He was challenging the decision of an Eleventh Circuit panel which concluded the district court lacked jurisdiction to hear his objections to the unlawful protection from removal by the President that Securities and Exchange Commission (SEC) administrative law judges (ALJs) enjoy. Former U.S. Solicitor General Greg Garre of Latham & Watkins authored the cert. petition.

In 2014 the SEC entered a formal order of investigation of Gibson’s trading activities. Gibson’s first ALJ, who ruled on his case in 2017, was deemed unlawfully appointed according to the U.S. Supreme Court’s 2018 decision in Lucia v. SEC. Rather than try Gibson in federal court, the SEC subjected him to a second hearing before another constitutionally-defective ALJ. NCLA argues that SEC ALJs enjoy multiple layers of protection from removal by the President of the United States. Currently, ALJs can only be removed for cause, and the only people who can remove them are SEC Commissioners and Merit Systems Protection Board members—also people whom the President can only remove for cause.

SEC’s scheme fails to follow two controlling Supreme Court decisions: Free Enterprise Fund v. PCAOB and Thunder Basin v. Reich. In the Supreme Court unequivocally held that officers of the United States—like SEC ALJs—may enjoy only one layer of for-cause removal protection. Otherwise, the President’s Article II duty to ensure that federal officers are doing their jobs is unduly restricted. Free Enterprise Fund also unanimously held that district courts have jurisdiction to hear constitutional challenges to structural defects in agency tribunals under the very statutory provision at issue in Mr. Gibson’s case. Thus, the Eleventh Circuit’s ruling—and that of several other circuits—conflicts with the Supreme Court’s precedent in Free Enterprise Fund. Thunder Basin instructs that courts must hear claims that cannot be meaningfully reviewed later, are wholly collateral, and are outside agency competence and expertise—all of which are true in this case.

The SEC’s pattern of ignoring such precedents must be corrected. NCLA has another case in the works that may reach the Supreme Court on this same issue. NCLA has oral argument in front of an en banc Fifth Circuit on Jan. 20 in a similar case representing single-mom Michelle Cochran of Dallas, TX. If the Fifth Circuit rules against the SEC, that would set up a split in the law among the circuits, which might persuade the Supreme Court to address the issue.

NCLA released the following statements: 

“Christopher Gibson will have endured two constitutionally flawed administrative trials, multiple appeals and surrendered six figures in government penalties before a competent court can decide the threshold question of whether his ALJ had the right to try him in the first place. And, he will face a third retrial if he is able to vindicate his rights in a circuit court at the end of his administrative appeal. This is senseless, costly to both the government and its targets, and illogical. NCLA intends to continue to fight to protect similarly situated Americans’ constitutional rights and restore rationality to our system of justice.”

—Peggy Little, NCLA Senior Litigation Counsel 

“NCLA is disappointed that the Supreme Court chose not to resolve this jurisdictional issue that is preventing lower courts from even addressing the important constitutional question at issue, but we are not giving up. Christopher Gibson and others like him should not have to pony up six-figure fines to the SEC before an Article III federal court ever even hears the merits of their valid constitutional claims.”

—Mark Chenoweth, Executive Director and General Counsel, NCLA

ABOUT NCLA 

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

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Washington, DC (December 21, 2020) – The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, today filed a reply brief related to its petition for a writ of certiorari to the U.S. Supreme Court in the case of Christopher M. Gibson v. U.S. Securities and Exchange Commission. The brief, lead authored by former U.S. Solicitor General Greg Garre, explains why the Court must answer the question presented in the case. Namely, has Congress by implication eliminated the ability for people who become the targets of administrative action to access federal district courts to hear structural constitutional challenges to the very legitimacy of the Administrative Law Judges (ALJs) presiding over their cases?

The case directly affects hundreds of SEC enforcement actions brought each year—and Americans’ rights to enforce the Constitution in real courts. Targets like NCLA client Christopher Gibson in this case, and Michelle Cochran in Cochran v. SEC, are shedding light on the dangers posed by the Administrative State. NCLA argues that the U.S. Supreme Court unequivocally held in Free Enterprise Fund v. PCAOB that officers of the United States—like SEC ALJs— may enjoy only one layer of for-cause removal protection. Otherwise, the President’s Article II duty to ensure that federal officers are doing their jobs is unduly restricted.

The SEC’s scheme fails to follow two controlling Supreme Court decisions: Free Enterprise Fund and Thunder Basin v. Reich. The SEC essentially ghosts Free Enterprise Fund, relegating it to a single paragraph at the end of its response brief. The stark conflict between the erroneous decision of the Eleventh Circuit and Free Enterprise Fund, which unanimously held that district courts do have jurisdiction to hear removal-based constitutional challenges, alone warrants certiorari. Furthermore, Thunder Basin instructs that courts must hear claims that cannot be meaningfully reviewed later, are wholly collateral, and are outside agency competence and expertise—as in this case. The SEC’s pattern of ignoring such precedents must be corrected.

In its reply, NCLA also points out that because five circuits from across the country have held that district courts lack jurisdiction over a critical class of structural constitutional claims, such recurring error has eliminated a vital check on unconstitutional administrative action.

To right this wrong, NCLA is asking the Supreme Court to grant the petition for a writ of certiorari and stop this abuse of power by SEC. Mr. Gibson must be allowed to gain access to a federal court to vindicate structural constitutional claims that directly impact individual liberty. Otherwise, he will almost certainly have to pay a six-figure fine before ever getting to present his constitutional arguments to a real federal judge. That result would be neither just nor constitutional.

NCLA released the following statement: 

“Federal appellate courts have required Americans to undergo a punishing, years-long gauntlet before they can even challenge the constitutionality of wayward administrative proceedings. This makes no sense. Christopher Gibson has already endured one unconstitutional in-house hearing, is in the midst of a second that should be set aside, and now faces the prospect of a third one years from now for the same alleged offense. The Supreme Court should enforce its prior decisions and course-correct the circuits’ costly and ruinous march of error.”

—Peggy Little, NCLA Senior Litigation Counsel 

ABOUT NCLA 

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

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Washington, DC (October 5, 2020) – The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group draws strong support for its petition for a writ of certiorari to the U.S. Supreme Court in the case of Christopher M. Gibson v. U.S. Securities and Exchange Commission.

Six briefs amici curiae were filed today in support of NCLA’s petition, asking the highest court in the land to review a decision of the United States Court of Appeals for the Eleventh Circuit. At issue is whether individuals like NCLA’s client, Mr. Gibson, may gain access to a federal court to vindicate structural constitutional claims that directly impact individual liberty before they must run the entire gauntlet of agency administrative proceedings.

NCLA believes the Eleventh Circuit panel erred in concluding the district court lacked jurisdiction to hear Mr. Gibson’s objections to the unlawful layers of protection from removal by the President that SEC administrative law judges (ALJs) enjoy.

NCLA released the following statement:  

“The amicus briefs submitted in support of Christopher Gibson’s petition make a compelling case that SEC, through a pattern of taking legally erroneous positions, is willing to tie up those whom it charges in an endless loop of repetitive administrative hearings that deprives them of due process and their civil liberties for years. These amicus briefs forcefully argue that the Supreme Court must stop this abuse of power.”

– Peggy Little, NCLA Senior Litigation Counsel 

Excerpts from the briefs amici curiae submitted in support of NCLA’s Cert. Petition: 

“The agency seeking to barricade the courthouse doors in this case—the SEC—is no stranger to this Court.  Over the past decade, the Court has granted certiorari to hear four separate challenges to long-standing SEC statutory interpretations that were not within the agency’s core expertise. In all four cases the Court concluded that the SEC had erred, sometimes for decades and sometimes with the agreement of the lower courts. … As this case illustrates, the SEC is again steering lower courts astray on an important legal issue that is beyond the agency’s competence.”

—Cato Institute, Competitive Enterprise Institute and the U.S. Chamber of Commerce 

“Petitioner Gibson is one of many citizens who has been investigated, prosecuted, and subjected to a hearing—all within a single agency in a single branch of government. Worse, many of the agents who oversee these proceedings are insulated by two layers of protection from removal. … The [Supreme] Court’s decision in Free Enterprise Fund v. Public Co. Accounting Oversight Board, 561 U.S. 477 (2010) demands the opposite result. … [C]ertiorari is needed to clarify Free Enterprise Fund and, more importantly, to ensure federal courts retain their vital role as a check on executive overreach.”

—Southeastern Legal Foundation 

“The jurisdictional issue presented by this appeal is … whether justice delayed is justice denied … [whether a] violator must weather a ferocious and protracted administrative storm, and suffer whatever damage in the form of monetary and other penalties the SEC ALJ inflicts, before pursuing a substantial, precedent-backed claim challenging SEC ALJs’ constitutional legitimacy. … The draconian financial penalties and career-ending suspensions and debarments that the SEC imposes on hundreds of individuals every year—either by ratifying nearly all of its ALJs’ decisions or coercing settlement agreements to which alleged securities law violators accede under duress—further illuminate the reasons why certiorari should be granted in this case.”

—Atlantic Legal Foundation 

“If the decision below is allowed to stand, the hundreds of Americans who are compelled each year to defend themselves in SEC administrative proceedings will have no meaningful opportunity to contest in federal court the constitutionality of the SEC’s proceedings. … Americans should not have to wait in line for the better part of a decade before courts adjudicate their constitutional disputes with the government.”

—George R. Jarkesy, Jr. 

“[T]he SEC seeks to deprive Petitioner of private rights through an in-house administrative action overseen by an SEC-employed administrative law judge. … Under the Constitution, these matters are reserved for resolution in the Judicial Branch. When … litigants are required to slog through one or, upon an administrative appeal, two Executive Branch judicial adjudications before they may access an Article III court, they are denied their long-standing due process right against arbitrary deprivation of private rights.”

—Pacific Legal Foundation 

“[The circuit courts’] error is pernicious, self-replicating, and should not be allowed to stand. The [Supreme] Court should grant review here to clarify … that [case law] does not require the federal judiciary to look away from rogue administrative action that violates individuals’ federal constitutional rights. … If the SEC removal scheme is unconstitutional, it is unconstitutional. Let the chips fall where they may. But it is no answer to bob and weave to duck the merits of that question, whether out of solicitude to the administrative state or otherwise. … This is particularly unfair where, as here, the agency not only lacks relevant expertise but has already decided the issue on the merits against Petitioner.”

—Americans for Prosperity Foundation  

Read Case Summary here. 

ABOUT NCLA 

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

Download the full document

Washington, DC (August 31, 2020) –The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, filed a petition for a writ of certiorari with the U.S. Supreme Court today in the case of Christopher M. Gibson v. U.S. Securities and Exchange Commission. Former U.S. Solicitor General Greg Garre of Latham & Watkins is counsel of record on the petition and led NCLA’s pro bono effort seeking certiorari.

The petition asks the highest court in the land to review a decision of the United States Court of Appeals for the Eleventh Circuit. At issue is whether individuals like Mr. Gibson may gain access to a federal court to vindicate structural constitutional claims that directly impact individual liberty before they must run the entire gauntlet of agency administrative proceedings. NCLA believes the Eleventh Circuit panel erred in concluding the district court lacked jurisdiction to hear Mr. Gibson’s objections to the unlawful protection from removal by the President that SEC administrative law judges (ALJs) enjoy.

Mr. Gibson’s case is one of many trapped on a treadmill of administrative proceedings that are going nowhere, before unconstitutional ALJs. In 2014 the SEC entered a formal order of investigation of Gibson’s trading activities. Gibson’s first ALJ, who ruled on his case in 2017, was deemed unlawfully appointed according to the U.S. Supreme Court’s 2018 decision in Lucia v. SEC.

Rather than try Gibson in federal court, the SEC subjected him to a second hearing before another constitutionally-defective ALJ. This time, the problem is that the ALJ enjoys multiple layers of for-cause removal protection. In Free Enterprise Fund v. Public Co. Accounting Oversight Board, the Supreme Court made clear in 2010 that “officers of the U.S.” may not be insulated from removal by more than one layer of for-cause protection. Further protection runs afoul of Article II of the Constitution, which requires the President to “take Care that the Laws be faithfully executed.”

Free Enterprise Fund also squarely held that district courts have jurisdiction to hear constitutional challenges to structural defects in agency tribunals under the very statutory provision at issue in Mr. Gibson’s case. Thus, the Eleventh Circuit’s ruling—and that of several other circuits—conflicts with the Supreme Court’s precedent in Free Enterprise Fund. Although the Supreme Court ordinarily awaits a circuit split before granting certiorari, the fact that so many circuits have followed one another in committing the same error is a compelling reason for granting review in this case.

NCLA also represents single mom Michelle Cochran in her similar case against the SEC.

NCLA released the following statements:  

“SEC charges put Americans’ personal, financial, professional and reputational futures in immediate and often permanent jeopardy. Such life-altering power should only be exerted before a constitutional ALJ. If the Supreme Court does not step in to course-correct the law, Christopher Gibson will have endured two trials, multiple appeals, and surrendered six figures to the government before any court can decide the threshold question of whether his ALJ had the right to try him in the first place—and he will face a third retrial even if he wins. This is senseless, costly, and illogical. NCLA is determined to secure justice for Gibson and all other similarly situated Americans.”

—Peggy Little, Senior Litigation Counsel, NCLA

“The courts of appeals—including the Eleventh Circuit—have gone off the rails when it comes to defendants challenging constitutional defects with agency decisionmakers. People like Christopher Gibson should not have to endure repeated pointless proceedings before ever having a chance to present their constitutional arguments to a real federal judge. The Supreme Court should grant cert in this case and let a federal district judge decide whether ALJs who enjoy multiple layers of protection from removal violate the U.S. Constitution.”

—Mark Chenoweth, Executive Director and General Counsel, NCLA

ABOUT NCLA  

NCLA is a nonpartisan, nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

Download the full document

Washington, DC (February 14, 2020) – The New Civil Liberties Alliance, a nonpartisan, nonprofit public-interest litigation group, filed a petition for rehearing en banc in the U.S. Court of Appeals for the Eleventh Circuit in the case of Christopher M. Gibson v. SEC.  Mr. Gibson’s case against the U.S. Securities and Exchange Commission (SEC) is disturbingly similar to scores of cases where that agency insists on putting people through pointless administrative proceedings before unconstitutional administrative law judges (ALJs) that are destined to be vacated.

NCLA believes the Eleventh Circuit panel erred in concluding the district court lacked jurisdiction to hear Mr. Gibson’s objections to the SEC’s second unconstitutional hearing in his case. As NCLA’s petition shows, the U.S. Supreme Court’s 2018 decision in Lucia v. SEC held that the SEC’s ALJs are “officers” of the United States. As such, NCLA argues, the ALJs may not enjoy more than one layer of for-cause tenure protection. Lucia clarified that defendants have a right not to be tried in front of constitutionally defective ALJs. Hence, federal district courts must have jurisdiction to decide before an administrative hearing takes place whether an ALJ has the proper constitutional authority to hear the case.

Mr. Gibson’s case is one of more than one-hundred invalid SEC hearings nullified following the Lucia v. SEC decision. In 2014 the SEC entered a formal order of investigation of Gibson that focused on trading activities. An ALJ found him in violation of securities laws in a 2017 hearing. Gibson filed a petition for review of that decision which sat undecided before the Commission for over two years. In June 2018, the Supreme Court’s decision in Lucia v. SEC vacated the ALJ’s initial decision. Rather than retry Gibson before the Commission itself, the SEC subjected him to a second hearing before another constitutionally defective ALJ. This time, the problem is that the ALJ enjoys multiple layers of removal protection.

Under an earlier precedent called Free Enterprise Fund v. Public Co. Accounting Oversight Board, the Supreme Court made clear that officers of the U.S. may not be insulated from removal by more than one layer of tenure protection without running afoul of the clause in Article II of the Constitution that requires the President to “take Care that the Laws be faithfully executed.” Free Enterprise Fund also squarely held that district court jurisdiction exists under the very statutory provision at issue in Mr. Gibson’s case.

NCLA also represents Michelle Cochran in her Fifth Circuit case against the SEC for trying to force her to appear before another invalid ALJ.

NCLA released the following statements:

“The SEC has defied the Supreme Court’s instruction to give Mr. Gibson a new hearing before a properly appointed official. This circuit should rehear the case en banc and rein in a lawless and defiant agency and course correct the law of this circuit.” —Peggy Little, Senior Litigation Counsel, NCLA

“NCLA will not rest until the courts recognize the injustice of the SEC’s administrative law judges and the costly, life-altering, business and reputation destroying proceedings before these ALJs who preside in violation of the Constitution—as the Government itself admits.” —Jessica Thompson, Litigation Counsel, NCLA

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

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