Federal district courts are generally presumed to have plenary jurisdiction when private citizens allege colorable claims that federal executive-branch agencies and officials are pursuing punitive governmental action against them without legitimate constitutional authority. Such claims present quintessential federal questions falling squarely within the jurisdictional grant of 28 U.S.C. § 1331 (“The district courts shall have original jurisdiction of all civil actions arising under the Constitution … of the United States”). See also 5 U.S.C. § 702 (authorizing judicial relief, including injunctive relief, when a person is “suffering legal wrong because of agency action, or [is] adversely affected or aggrieved by agency action”). The exercise of federal court jurisdiction over those claims is essential to protecting constitutional commitments to the rule of law, separation of powers, due process, individual liberty, and political accountability. See generally Bell v. Hood, 327 U.S. 678, 684 (1946) (“it is established practice for [the Supreme Court] to sustain the jurisdiction of federal courts to issue injunctions to protect rights safeguarded by the Constitution”); Corr. Servs. Corp. v. Malesko, 534 U.S. 61, 74 (2001) (“injunctive relief has long been recognized as the proper means for preventing entities from acting unconstitutionally”).
In certain cases — most notably Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994), Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010), and Elgin v. Department of Treasury, 567 U.S. 1 (2012) — the Supreme Court has recognized a limited exception to this presumption of federal question jurisdiction in the administrative law context. These cases hold that if Congress has enacted a statute providing for delayed, post-agency appellate review of adverse agency action, and if Congress’s intent to strip district courts of their presumptive jurisdiction over challenges to agency action is either explicit or “fairly discernible,” then district courts may lack jurisdiction to adjudicate at least some kinds of challenges to agency action notwithstanding Section 1331.
Explicitly acknowledging concern and reservations about the result in this case, the court below held that Section 25 of the Securities Exchange Act of 1934 (15 U.S.C. § 78y) is one of those jurisdiction- stripping statutes. It therefore found no jurisdiction to adjudicate plaintiff-appellant Michelle Cochran’s complaint that the Securities and Exchange Commission (“SEC”) is pursuing her (for a second time) in an administrative law-enforcement proceeding overseen by an SEC administrative law judge (“ALJ”) who lacks legitimate constitutional authority to conduct the proceeding or to issue binding orders and commands against her during the course of the proceeding.
The court below was right to harbor concerns and reservations. It cited the Supreme Court’s decision in Federal Trade Commission v. Standard Oil Co. of California, 449 U.S. 232 (1980), as essentially binding authority and cited several appellate decisions outside the Fifth Circuit as persuasive authority. But the Standard Oil case is plainly distinguishable, and the non-binding decisions from other circuits suffer from at least two fundamental errors. First, as discussed below, they misconstrued (and thereby trivialized) the serious ongoing constitutional injury alleged in cases like this one by conflating that injury with the mere burden and expense of administrative litigation or the punitive statutory sanctions that might be imposed if securities law violations are ultimately proved. Second, they overlooked the practical reality that Ms. Cochran and similarly-situated victims of this type of constitutional injury, if limited to delayed post-agency appellate review under Securities Exchange Act Section 25, may never get any opportunity to seek or obtain redress for their constitutional injury, and even if they do it will be too late to undo or remedy the injury.
Because this case alleges a colorable constitutional claim of ongoing ultra vires government action, and because Section 25 cannot reasonably be read to strip district courts of jurisdiction over such a claim, this Court should allow the case to proceed in the district court.