Bennett v. U.S. Securities & Exchange Commission

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-2584

DAWN J. BENNETT; BENNETT GROUP FINANCIAL SERVICES, LLC,

Plaintiffs – Appellants,

v.

U.S. SECURITIES AND EXCHANGE COMMISSION,

Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Paul W. Grimm, District Judge. (8:15-
cv-03325-PWG)

Argued: October 28, 2016 Decided: December 16, 2016

Before MOTZ, KING, and DUNCAN, Circuit Judges.

Affirmed by published opinion. Judge Duncan wrote the opinion,
in which Judge Motz and Judge King joined.

ARGUED: Andrew Joseph Morris, MORVILLO LLP, Washington, D.C.,
for Appellants. Melissa N. Patterson, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Gregory
Morvillo, Eugene Ingoglia, Ellen M. Murphy, MORVILLO LLP, New
York, New York, for Appellants. Benjamin C. Mizer, Principal
Deputy Assistant Attorney General, Beth S. Brinkmann, Deputy
Assistant Attorney General, Mark B. Stern, Mark R. Freeman,
Megan Barbero, Daniel Aguilar, Tyce R. Walters, Civil Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Rod J.
Rosenstein, United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Baltimore, Maryland, for Appellee.
DUNCAN, Circuit Judge:

Dawn Bennett and her firm, Bennett Group Financial

Services, LLC, (collectively, “Bennett”) appeal the district

court’s dismissal on jurisdictional grounds of her suit

challenging the constitutionality of the administrative

enforcement proceeding that the Securities and Exchange

Commission (“SEC” or “Commission”) brought against her. For the

following reasons, we join the Second, Seventh, Eleventh, and

D.C. Circuits that have addressed the issue, and affirm.

I.

A.

Congress has authorized the Commission to address potential

violations of the federal securities laws, including the

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C.

§ 78a et seq., either by filing an enforcement action in federal

district court or by instituting an administrative proceeding.

See, e.g., 15 U.S.C. §§ 78u(d), 78u-1(a)(1), 78u-3. Congress

further authorized the SEC to delegate its adjudicative

functions to an administrative law judge (“ALJ”), while

“retain[ing] a discretionary right to review the action of any

such” ALJ on “its own initiative” or at a party’s request.

Id. § 78d-1(a)-(b). The SEC implemented this framework through

its Rules of Practice. See 17 C.F.R. § 201.110. When the

2
Commission initially assigns enforcement proceedings to an ALJ,

the ALJ holds a hearing and makes an initial decision, which the

respondent may appeal by petitioning for review before the full

Commission. Id. §§ 201.360(a)(1), 201.410(a). The Commission

reviews the ALJ’s initial decision de novo and may take

additional evidence. See id. §§ 201.410, 201.411(a), 201.452;

see also Jarkesy v. SEC, 803 F.3d 9, 13 (D.C. Cir. 2015).

Whether or not a party seeks further administrative review, the

Commission alone--not the ALJ--has the authority to issue the

agency’s final decision in the proceeding.

17 C.F.R. § 201.360(d)(2).

In the Exchange Act, Congress has provided that judicial

review of administrative enforcement proceedings shall be

available directly in the appropriate court of appeals.

15 U.S.C. § 78y(a)(1). When an aggrieved person files a

petition, the jurisdiction of the court of appeals becomes

exclusive. Id. 78y(a)(3). For judicial review of final

Commission orders, the Exchange Act specifies what constitutes

the agency record, id. § 78y(a)(2), the standard of review,

id. § 78y(a)(4), and the process for seeking a stay of the

Commission order either before the Commission or in the court of

appeals, id. § 78y(c)(2). Against this background, we turn to

the present dispute.

3
 B.

Dawn Bennett founded Bennett Group Financial Services, LLC

as an independent investment firm around 2006. Around January

2012, the Commission began investigating Bennett and her firm.

On September 9, 2015, the Commission instituted an

administrative proceeding against Bennett to determine whether,

as the SEC’s Division of Enforcement alleged, Bennett had

violated the antifraud provisions of the federal securities laws

by materially misstating the amount of assets managed for

investors, materially misstating investor performance, and

failing to adopt and implement adequate written policies for

calculating and advertising assets managed and investment

returns. In re Bennett Grp. Fin. Servs., LLC, Exchange Act

Release No. 75864, 2015 WL 5243888 (Sept. 9, 2015) (order

instituting proceedings). The proceedings sought to determine

whether Bennett’s conduct warranted disgorgement, civil monetary

penalties, a cease-and-desist order, and a securities industry

bar. Id. at *9–10. The Commission assigned the initial stages

of the proceeding to an ALJ. Id. at *10. The ALJ scheduled a

hearing on the merits of Bennett’s case for January 25, 2016.

In re Bennett Grp. Fin. Servs., LLC, SEC Release No. 3269,

2015 WL 12766768 (Oct. 29, 2015) (ALJ scheduling order).

On October 30, 2015, Bennett filed this action in federal

district court, seeking to enjoin the administrative proceeding

4
and a declaration that it is unconstitutional. The Complaint

alleged that the SEC’s administrative enforcement proceedings

violate Article II of the United States Constitution, which

provides that “[t]he executive Power shall be vested in a

President of the United States,” U.S. Const. art. II, § 1,

cl. 1, and that “the Congress may by Law vest the Appointment of

such inferior Officers, as they think proper . . . in the Heads

of Departments,” id. § 2, cl. 2. Specifically, Bennett alleged

that (1) ALJs count as “inferior Officers” and that the SEC’s

Commissioners--collectively, a “Head” of a “Department”--failed

to appoint them, and (2) those ALJs enjoy at least two levels of

protection against removal, which impedes presidential

supervision over their exercise of “executive Power” and thereby

contravenes the separation of powers. Cf. Free Enterprise Fund

v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 492 (2010).

The district court determined it lacked jurisdiction over

Bennett’s case and dismissed the action on December 10, 2015.

Bennett timely appealed, seeking an injunction pending appeal

and expedited review. Dkt. No. 9 (Dec. 28, 2015). This court

denied both requests. Dkt. No. 19 (Jan. 22, 2016). 1

1 Subsequently, in its initial decision, the ALJ found that
Bennett willfully violated numerous provisions of the securities
laws, barred her from the industry, and imposed disgorgement and
civil penalties collectively exceeding $4 million. Bennett Grp.
Fin. Servs., LLC, Exchange Act Release No. 1033, 2016
(Continued)
5
 II.

A.

We review de novo a district court’s dismissal of a

complaint for lack of subject-matter jurisdiction. Nat’l

Taxpayers Union v. U.S. Soc. Sec. Admin., 376 F.3d 239, 241 (4th

Cir. 2004).

B.

Federal district courts generally have “original

jurisdiction of all civil actions arising under the

Constitution, laws, or treaties of the United States.”

28 U.S.C. § 1331; see also id. § 2201. However, Congress may

expressly divest the district courts of jurisdiction over

certain claims. See, e.g., Shalala v. Ill. Council on Long Term

Care, Inc., 529 U.S. 1, 5 (2000). Congress can also impliedly

preclude jurisdiction by creating a statutory scheme of

administrative adjudication and delayed judicial review in a

particular court. See, e.g., Thunder Basin Coal Co. v. Reich,

510 U.S. 200, 207 (1994).

Three Supreme Court decisions principally inform our

analysis of the inquiry presented: Thunder Basin Coal Company v.

WL 4035560, at *47–49 (ALJ July 11, 2016) (default decision).
The Commission granted Bennett’s petition for review, and
briefing was to be completed by November 4, 2016. Bennett Grp.
Fin. Servs., LLC, Exchange Act Release No. 4491, 2016 WL 4426912
(Aug. 22, 2016).

6
Reich, Free Enterprise Fund v. Public Accounting Oversight

Board, and Elgin v. Department of the Treasury. 2 We discuss each

in turn.

C.

1.

In Thunder Basin, the Supreme Court considered a

petitioner’s pre-enforcement challenge to the Federal Mine

Safety and Health Amendments Act of 1977, 30 U.S.C. § 801 et

seq. (“Mine Act”). 510 U.S. at 202. Thunder Basin, a coal

company, objected to a Mine Act regulation that required it to

post the names of certain union representatives authorized under

the statute to accompany the Secretary of Labor during physical

inspections of mines. See id. at 203–04 (citing

30 C.F.R. § 40.4). Rather than seek review of the regulation

through the Mine Act’s judicial-review scheme, Thunder Basin

filed a lawsuit in federal district court alleging that

requiring it to challenge the regulation through the statute’s

judicial-review scheme violated due process. Id. at 205.

The Supreme Court rejected Thunder Basin’s argument. The

Court described the Mine Act’s “detailed structure for reviewing

violations of ‘any mandatory health or safety standard, rule,

order, or regulation promulgated’ under the Act.” Id. at 207

2 Thunder Basin, 510 U.S. 200 (1994); Free Enterprise, 561
U.S. 477 (2010); Elgin, 132 S. Ct. 2126 (2012).

7
(quoting 30 U.S.C. § 814(a)). Under the Mine Act, a mine

operator can challenge an adverse agency order before an ALJ,

subject to discretionary review by the Federal Mine Safety and

Health Review Commission (“MSHRC”). Id. at 207–08; 30 U.S.C.

§ 823(d)(1). A mine operator can petition the MSHRC to review

the ALJ’s decision, or the MSHRC can direct a review at its own

initiative. See 30 U.S.C. § 823(d)(1), (2)(A)(i). If the mine

operator remains dissatisfied with the MSHRC’s decision, it can

challenge that decision in the appropriate federal court of

appeals, which exercises “exclusive” jurisdiction over such

cases. 30 U.S.C. § 816(a)(1); see also Thunder Basin, 510 U.S.

at 208.

In reviewing the statutory scheme, the Court further noted

that Congress demonstrated its ability to preserve district-

court jurisdiction in limited circumstances: the Mine Act

expressly authorizes district-court jurisdiction over actions by

the Secretary of Labor to enjoin habitual violations and coerce

payment of civil penalties; by contrast, “[m]ine operators enjoy

no corresponding right but are to complain to the Commission and

then to the court of appeals.” Thunder Basin, 510 U.S. at 209

(footnote omitted). Based on the “comprehensive review

process,” the Court found that congressional intent to preclude

district-court jurisdiction over pre-enforcement claims was

“fairly discernible.” Id. at 208, 216. Moreover, the Court

8
concluded that “petitioner’s statutory and constitutional

claims”--even a constitutional claim that challenged the

legitimacy of the administrative process itself--could be

“meaningfully addressed in the Court of Appeals.” Id. at 215.

2.

Several years later, in Free Enterprise, the Supreme Court

considered whether a district court could exercise jurisdiction

over another pre-enforcement challenge--an Article II challenge

to the Public Company Accounting Oversight Board (“PCAOB” or

“Board”)--despite the Exchange Act’s judicial-review provision

found at 15 U.S.C. § 78y. 561 U.S. at 489. The Board is a

government-created private, nonprofit corporation that

supervises accounting firms under the SEC’s oversight. Under

the Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat.

745 (codified as amended in scattered sections of 15 U.S.C.),

the SEC would appoint the PCAOB’s five members, and only some of

the Board’s actions required SEC approval. Free Enterprise, 561

U.S. at 489–90. The statute’s judicial-review scheme provided

for review of the Commission’s final rules and orders, such as

sanctions imposed following administrative adjudication, but

offered no path to judicial review for Board actions that did

not require SEC approval. See id.

In Free Enterprise, the Board “inspected [an accounting]

firm, released a report critical of its auditing procedures, and

9
began a formal investigation” of its practices. Id. at 487.

Under the statute, none of those regulatory actions would result

in a Commission rule or order, and so could not trigger a path

to judicial review under § 78y. See id. at 489–90. Petitioners

sued in federal district court, arguing that the Board

contravened the separation of powers, because Board members

enjoyed two layers of for-cause removal that impeded

presidential supervision of executive power, and the

Appointments Clause, because Board members were officers that

required presidential appointment and Senate advice and consent.

Id. at 487–88. Petitioners sought an injunction preventing the

Board from exercising its powers, and a declaration that it was

unconstitutional. Id. at 487.

The Free Enterprise Court held that § 78y did not preclude

the district court from exercising jurisdiction on the facts

presented. Id. at 491. Because the Board had not undertaken

regulatory action that would yield a reviewable Commission order

or rule, the petitioners would have had to “challenge a Board

rule at random” or “bet the farm” by voluntarily incurring a

sanction in order to trigger § 78y’s mechanism for

administrative and judicial review. Id. at 490 (citation

omitted). The Court concluded that this was not a “‘meaningful’

avenue of relief.” Id. at 491 (quoting Thunder Basin, 510 U.S.

at 212). The Court also noted that the petitioner’s

10
constitutional challenge was “‘collateral’ to any Commission

orders or rules from which review might be sought,” and “outside

the Commission’s competence and expertise” because it did not

involve technical considerations or fact-bound inquiries. Id.

at 490, 491. Therefore, the Court held that § 78y did not strip

the district court of jurisdiction over petitioners’ claims.

3.

In Elgin, the last decision in our trilogy, federal

employees’ failure to comply with a federal statute prompted

their discharge from government agencies. Elgin v. Dep’t of

Treas., 132 S. Ct. 2126, 2131 (2012). Elgin, one of the

employees, appealed his dismissal to the Merit Systems

Protection Board (“MSPB”) pursuant to a “comprehensive system”

for resolving personnel decisions involving federal employees

established by Congress in the Civil Service Reform Act of 1978

(“CSRA”). Id. at 2130 (quoting United States v. Fausto,

484 U.S. 439, 455 (1988)). That process requires adjudication

first before the MSPB, subject to review in the Federal Circuit,

which has exclusive jurisdiction over such appeals. Id.

at 2130–31. Before the administrative process had concluded,

however, Elgin joined a suit in federal district court in which

petitioners argued that the statutes providing the basis for

their discharge were unconstitutional. Id. at 2131.

11
 The Elgin Court held that the CSRA precluded district-court

jurisdiction over petitioners’ claims. Id. at 2130. After

reviewing the “painstaking detail” of the CSRA’s provisions for

federal employees to obtain judicial review of adverse

employment actions, the Court concluded that Congress evinced a

“fairly discernible” intent to deny covered employees an

additional avenue of review in district court. Id. at 2134.

Significantly, the Court rejected the argument that it should

carve out constitutional claims from the judicial-review scheme

and allow them to proceed in district court, noting that “a

jurisdictional rule based on the nature of a[] . . .

constitutional claim . . . is hazy at best and incoherent at

worst.” Id. at 2135.

Petitioners raised “three additional factors” to argue that

their claims were not the type that Congress intended to exclude

from the statute’s judicial-review scheme, but the Court

disagreed on each point. Id. at 2136. First, the Court

emphasized that petitioners could receive meaningful review “in

the Federal Circuit, an Article III court fully competent to

adjudicate” their claims. Id. at 2137. Second, the Court

reasoned that petitioners’ constitutional claims were “the

vehicle by which” petitioners sought to reverse the discharge

orders, and thus were not “wholly collateral” to the statutory

scheme. Id. at 2139–40. Third, even though the MSPB could not

12
rule on the constitutionality of the statute, the Court noted

that its expertise could “otherwise be ‘brought to bear’” on

“many threshold questions that may accompany a constitutional

claim.” Id. at 2140 (quoting Thunder Basin, 510 U.S. at 214–

15). Thus, petitioners could not proceed outside the statutory

scheme and had to wait for judicial review in due course.

D.

Under Thunder Basin and its progeny, determining whether

Congress has impliedly divested district-court jurisdiction over

agency action involves a two-step inquiry. First, we ask

whether Congress’s intent to preclude district-court

jurisdiction is “fairly discernible in the statutory scheme.”

Thunder Basin, 510 U.S. at 207; see also Elgin, 132 S. Ct.

at 2132; Free Enterprise, 561 U.S. at 489. This involves

examining the statute’s text, structure, and purpose. Elgin,

132 S. Ct. at 2133. Second, we ask whether plaintiffs’ “claims

are of the type Congress intended to be reviewed within this

statutory structure.” Thunder Basin, 510 U.S. at 212; accord

Elgin, 132 S. Ct. at 2136–40. At this second stage, we consider

three factors. We focus on (1) whether the statutory scheme

“foreclose[s] all meaningful judicial review.” Thunder Basin,

510 U.S. at 212–13; see also Elgin, 132 S. Ct. at 2132; Free

Enterprise, 561 U.S. at 490–91. We also consider (2) the extent

to which the plaintiff’s claims are “wholly collateral” to the

13
statute’s review provisions, and (3) whether “agency expertise

could be brought to bear on the . . . questions presented.”

Thunder Basin, 510 U.S. at 212, 215; see also Elgin, 132 S. Ct.

at 2139–40; Free Enterprise, 561 U.S. at 490–91. Against this

background, we apply the Thunder Basin framework to the facts

before us. 3

III.

A.

1.

At the first step of our analysis, we readily discern from

the text and structure of the Exchange Act Congress’s intent to

channel claims first into an administrative forum and then on

appeal to a U.S. Court of Appeals. Like the Mine Act in Thunder

Basin, the Exchange Act includes a comprehensive scheme that

provides for judicial review in the appropriate court of

appeals, with substantially the same authority to affirm,

modify, enforce, or set aside final agency orders in whole or in

part, as well as authority to consider new arguments, reject

findings of fact, remand to adduce new evidence, and issue

stays. Compare 15 U.S.C. § 78y, with 30 U.S.C. § 816(a).

3 Bennett concedes that the Thunder Basin framework governs
whether the district court had jurisdiction to entertain her
suit. Appellants’ Br. at 8. Because we rule on jurisdictional
grounds, we do not reach the merits of Bennett’s claim.

14
Moreover, Congress demonstrated it knew how to preserve

district-court jurisdiction, but declined to do so: “like the

Mine Act, the statute here specifically authorizes district

courts to exercise jurisdiction over certain actions brought by

the agency but not by private parties.” Nat’l Taxpayers Union,

376 F.3d at 243; see also Thunder Basin, 510 U.S. at 209.

Compare 15 U.S.C. § 78u(d)(1), with 30 U.S.C. § 818. Our sister

circuits have concluded that the provisions in the Exchange Act

are “nearly identical,” Jarkesy, 803 F.3d at 16–17, and

“materially indistinguishable,” Hill v. SEC, 825 F.3d 1236, 1242

(11th Cir. 2016), from the provisions in the Mine Act that the

Thunder Basin Court found eliminated district-court

jurisdiction. We agree. Congressional intent to deny

collateral district-court challenges is “fairly discernible”

from the text and structure of the Exchange Act.

2.

Bennett advances two main arguments at Thunder Basin step

one, both of which we find unpersuasive. 4

4
Bennett also claims that the “painstaking detail” in the
Exchange Act’s judicial-review provision “tells us nothing about
the scope of the SEC’s jurisdiction to issue . . . orders.”
Appellants’ Br. at 24. That argument leaps ahead: we decide
here whether the district court had jurisdiction, which depends
on the scope of the review scheme; we do not decide the scope of
the SEC’s jurisdiction or the constitutional legitimacy of ALJ
appointments, questions that go to the merits.

15
 She first relies on language in Free Enterprise taken out

of context: “The Government reads § 78y as an exclusive route to

review. But the text does not expressly limit the jurisdiction

that other statutes confer on district courts. See, e.g.,

28 U.S.C. §§ 1331, 2201. Nor does it do so implicitly.”

561 U.S. at 489. Bennett argues that this language is

dispositive of the issue before us because she, too, asserts an

Article II challenge to the agency’s authority.

Bennett reads too much into the Free Enterprise Court’s

conclusion, which is distinguishable on the facts. 5 Looking at

the statutory text, the Court noted that § 78y “provides only

for judicial review of Commission action, and not every Board

action is encapsulated in a final Commission order or rule.”

Free Enterprise, 561 U.S. at 490. The Free Enterprise

petitioners challenged the constitutionality of the Board

members’ appointments before enforcement; no Board rule directly

implicated petitioners’ challenge, nor had the Board issued a

sanction against the petitioners. There was thus no reviewable

“Commission action,” nor even a guarantee that the Board’s

investigation would eventually culminate in reviewable

“Commission action.” The Court reasoned that, in such

5
We also note that most of the Supreme Court’s reasoning in
Free Enterprise centered not on the text of the statute, but on
the three Thunder Basin step-two factors, which we discuss
below.

16
circumstances, Congress would not have intended petitioners to

challenge a Board rule at random or incur a sanction in order to

trigger judicial review under § 78y. The Court therefore

allowed petitioners’ claims against the Board to proceed outside

the statutory scheme.

Here, by contrast, Bennett necessarily challenges

“Commission action.” Id. The Commission has instituted an

administrative disciplinary proceeding against Bennett, and she

challenges the legitimacy of the ALJ presiding over that

proceeding. Unlike an inspection or investigation, a

disciplinary proceeding results in a final Commission order.

See 17 C.F.R. §§ 201.411(a), 201.360(d)(2). Thus, unlike the

petitioners’ claims in Free Enterprise, Bennett’s constitutional

claims “fall within the fairly discernible scope of § 78y’s

review procedures” because the proceedings will result in a

reviewable Commission order. Hill, 825 F.3d at 1243.

Bennett’s second textual argument fares no better. Bennett

argues the Exchange Act’s saving clause, which provides that

“the rights and remedies provided by this chapter shall be in

addition to any and all other rights and remedies that may exist

at law or in equity,” 15 U.S.C. § 78bb(a)(2), shows Congress did

not intend to make the statutory remedies exclusive, and thus

indicates that congressional intent to preclude district-court

17
review of constitutional claims of the type she raises here is

not “fairly discernible” from the text.

Bennett cites Abbott Laboratories v. Garner, a case in

which the Supreme Court found a similar saving clause “strongly

buttressed” its conclusion that the statute had not eliminated

district-court jurisdiction over a challenge to a regulation.

387 U.S. 136, 144 (1967), abrogated on other grounds by Califano

v. Sanders, 430 U.S. 99 (1977). There, however, the Court

emphasized that the judicial-review provision in the statute did

not cover the particular claim at issue: The statute provided

“special-review procedures” to deal with technical factual

determinations, id. at 144, for “certain enumerated kinds of

regulations, not encompassing those of the kind involved” in the

case, id. at 141 (footnote omitted). Here, by contrast, the

judicial-review provision in § 78y encompasses all objections to

final agency action, including the constitutional objections

Bennett raises. See Hill, 825 F.3d at 1244. 6

6That a statute both grants exclusive jurisdiction to a
U.S. Court of Appeals to review final agency action and includes
a saving clause preserving rights and remedies is not internally
inconsistent. For instance, Congress may have wanted to channel
all claims to a particular forum (with the judicial-review
scheme) while simultaneously preserving the Commission’s ability
to enforce state securities laws (via the saving clause).
Further, the Supreme Court has recently construed the Exchange
Act’s saving clause narrowly when it found that the clause did
not preserve antitrust claims. See Credit Suisse Sec. (USA) LLC
v. Billing, 551 U.S. 264, 275 (2007).
(Continued)
18
 We conclude that Congress’s intent to preclude district-

court jurisdiction is “fairly discernible” from the statutory

scheme here.

B.

At the second stage of inquiry, in determining whether

Bennett’s claims “are of the type Congress intended to be

reviewed within th[e] statutory structure,” we consider the

three Thunder Basin factors: (1) meaningful review,

(2) collateral claims, and (3) agency expertise.

510 U.S. at 212. We address each factor in turn. 7

7 We agree with our sister circuits to have addressed the
matter that meaningful judicial review is the most important
factor in the Thunder Basin analysis. See Hill, 825 F.3d
at 1245 (stating that meaningful judicial review is “the most
critical thread in the case law”) (quoting Bebo v. SEC, 799 F.3d
765, 774 (7th Cir. 2015)); Tilton v. SEC, 824 F.3d 276, 282
(2d Cir. 2016) (same); see also Nat’l Taxpayers Union, 376 F.3d
at 243 (concluding that the Thunder Basin Court “rested its
conclusion” on the availability of meaningful judicial review).
But see Jarkesy, 803 F.3d at 22 (concluding that the Thunder
Basin factors are “guideposts for a holistic analysis”). This
interpretation is most consistent with the Supreme Court’s
treatment. In Thunder Basin, the Court noted that it would
uphold district-court jurisdiction “particularly where a finding
of preclusion could foreclose all meaningful judicial review.”
510 U.S. at 212–13 (emphasis added); see also Elgin, 132 S. Ct.
at 2132 (emphasizing the availability of some judicial review at
beginning of Thunder Basin’s two-step analysis); Free
Enterprise, 561 U.S. at 490–91 (focusing on petitioners’
inability to meaningfully pursue their constitutional claims
under the administrative scheme and discussing meaningful relief
when assessing whether the claims were “wholly collateral”).

19
 1.

With respect to meaningful review, Bennett contends that

post-proceeding consideration of her constitutional challenge

will be meaningless under § 78y because the violation is

exposure to the unconstitutional proceeding, rather than any

adverse decision on the merits. 8 Characterizing her claim as a

“structural, prophylactic” challenge to the constitutionality of

the forum itself, she contends that the only appropriate relief

is an injunction to halt the allegedly unconstitutional

administrative proceeding before it occurs. Appellants’ Br.

at 26.

The Supreme Court has rejected analogous arguments. With

respect to the nature of the constitutional challenge, in

Thunder Basin the Court recognized that “[a]djudication of the

8
In her reply brief, however, Bennett suggests that her
true concern is a sanction. Reply Br. at 11. If so, then
Bennett’s claim has even less merit for two reasons. First,
contrary to her assertion, her claim does “seek to affect the
merits of the SEC proceeding,” Appellants’ Br. at 40, and so is
not “wholly collateral.” Second, the statute’s judicial-review
scheme ensures “meaningful review” because a court of appeals
can remedy any sanctions order. If the Commission imposes
sanctions in its final order, Bennett can request a stay pending
judicial review before the Commission, 17 C.F.R. § 201.401, and
before the court of appeals once it obtains exclusive
jurisdiction, 15 U.S.C. § 78y(c)(2). Even if Bennett fails to
obtain a stay, the court of appeals can vacate a Commission
order in whole. Id. § 78y(a)(3). Bennett cannot demonstrate
she is likely to suffer irreparable injury while awaiting
judicial review. See Thunder Basin, 510 U.S. at 218; Hill, 825
F.3d at 1247.

20
constitutionality of congressional enactments has generally been

thought beyond the jurisdiction of administrative agencies,”

510 U.S. at 215 (quoting Johnson v. Robison, 415 U.S. 361, 368

(1974)), but that “[t]his rule is not mandatory.” Id. The

Thunder Basin Court--evaluating a similar judicial-review scheme

under the Mine Act--found that petitioner’s “constitutional

claims . . . [could] be meaningfully addressed in the Court of

Appeals,” even when the petitioner there challenged the

constitutionality of the administrative process itself.

510 U.S. at 215. 9 Moreover, the Supreme Court has similarly

rejected the drawing of jurisdictional lines between agencies

and federal courts based on the nature of constitutional claims.

See Elgin, 132 S. Ct. at 2135–26 (noting that the line between

facial, as-applied, and other constitutional challenges to

statutes is “hazy at best and incoherent at worst”). Bennett

fails to explain why an Appointments Clause challenge to the ALJ

presiding over her proceeding differs appreciably from the

contention in Thunder Basin that compelling a firm to challenge

9 The Elgin Court similarly held that Congress can require
plaintiffs to bring challenges to the constitutionality of
statutes exclusively through the administrative scheme, even
when the initial agency cannot rule on the constitutional
question and the reviewing court lacks the power to conduct a
hearing to find facts relevant to that determination.
132 S. Ct. at 2136–39.

21
a regulation through the Mine Act’s judicial-review scheme

violates due process. Both attack the legitimacy of the forum. 10

Relatedly, Bennett argues that an unconstitutional

proceeding is, itself, the harm that she should be allowed to

avoid. The burden of defending oneself in an unlawful

administrative proceeding, however, does not amount to

irreparable injury. FTC v. Standard Oil Co. of Cal., 449 U.S.

232, 244 (1980). In Standard Oil, a company sued in district

court to enjoin an ongoing administrative proceeding, arguing

that the entire proceeding was unlawful because the agency had

initiated it without the evidentiary basis required by statute.

Id. at 235. The Court concluded that Standard Oil had to first

complete the administrative process before reaching a federal

court, and that this scheme provided meaningful judicial review.

See id. at 238. The Court emphasized that “the expense and

annoyance of litigation is ‘part of the social burden of living

under government.’” Id. at 244 (quoting Petroleum Expl., Inc.

v. Pub. Serv. Comm’n, 304 U.S. 209, 222 (1938)). Bennett argues

Standard Oil is inapposite because it did not involve a

10 Moreover, in analogous cases, federal courts require
litigants who unsuccessfully challenge the constitutionality of
the initial tribunal--including the authority of the presiding
decision maker--to endure the proceeding and await possible
vindication on appeal. See Tilton, 824 F.3d at 285 (discussing
cases).

22
constitutional claim. 11 But that distinction makes no material

difference for assessing the meaningfulness of judicial review

here, because Thunder Basin and Elgin establish that petitioners

can obtain meaningful review of constitutional claims through a

statutory scheme similar to the one here. Thunder Basin,

510 U.S. at 215–16; Elgin, 132 S. Ct. at 2136–39; see also Hill,

825 F.3d at 1246–47. 12

11 Bennett also argues that the injury is not just the
expense and emotional toll of litigation, but also the
“institutional integrity” of the government structure and her
individual liberty interest. The cases she cites undermine
these arguments. See CFTC v. Schor, 478 U.S. 833, 852 (1986)
(upholding scheme that “hew[ed] closely to the agency model
approved” previously by the Court “in Crowell v. Benson, 285
U.S. 22 (1932)”); Bond v. United States, 564 U.S. 211, 223
(2011) (stating that only when individuals “suffer otherwise
justiciable injury” and participate “in a proper case” may they
argue a structural constitutional objection, including that the
structure protecting individual liberty is compromised).

12 Bennett tries to distinguish Elgin and other similar
cases denying alternative avenues of appeal by arguing that in
those cases a reviewing court could provide “complete relief” by
reversing the final order issued in the initial forum, whereas
under the judicial-review scheme at issue here a court of
appeals could never issue the injunctive relief she seeks
because the proceedings would already have concluded. This
argument suggests that a court of appeals’ order ruling on
Bennett’s Appointments Clause claim and vacating any sanction
the Commission imposes would not provide “complete relief.”
That cannot be. Bennett “has no inherent right to avoid an
administrative proceeding at all.” Jarkesy, 803 F.3d at 27.
Bennett also assumes she is entitled to her preferred remedy--an
injunction in district court. That is also incorrect. As a
general matter, the Supreme Court has long recognized that
Congress may substitute remedies for illegal action. Cf. Cary
v. Curtis, 44 U.S. (3 How.) 236 (1845) (holding congressional
statute withdrew traditional right of action against customs
(Continued)
23
 Furthermore, cases in which the Supreme Court has concluded

that post-proceeding judicial review was not meaningful are

distinguishable in critical respects. Bennett places principal

reliance on Free Enterprise, where the Supreme Court held that

§ 78y was not an exclusive route to judicial review on the facts

of that case. But unlike the plaintiffs in Free Enterprise,

Bennett is already embroiled in an enforcement proceeding. To

bring her challenge to the constitutionality of ALJ appointments

before an Article III court, Bennett need not “bet the farm”--in

fact, she need not take any additional risks. Id. at 490. She

has already allegedly committed the actions that violate federal

securities laws.

Bennett misreads Free Enterprise when she asserts that the

case “applies the principle that a litigant who challenges the

collectors for illegally exacted duties and that aggrieved
parties were not unconstitutionally deprived of all access to
the courts because common-law remedies remained); McKesson Corp.
v. Div. of Alcoholic Beverages & Tobacco, Dep’t. of Bus.
Regulation of Fla., 496 U.S. 18, 36–37 (1990) (explaining that
for unlawfully exacted taxes pre- or post-deprivation remedies
satisfy due process). Thunder Basin applies this principle and
says that Congress can require persons subject to administrative
adjudication to pursue their claims exclusively there first
before reaching an Article III court. 510 U.S. at 216. We also
note that this case “does not present the ‘serious
constitutional question’ that would arise if an agency statute
were construed to preclude all judicial review of a
constitutional claim.” Thunder Basin, 510 U.S. at 215 n.20
(quoting Bowen v. Mich. Acad. of Family Physicians, 476 U.S.
667, 681 n.12 (1986)).

24
constitutionality of an agency forum is not required to endure

the administrative process and incur a sanctions order before

she has access to a court.” Reply Br. at 11. That is too

broad. What animated the Court in Free Enterprise was not that

a plaintiff might need to defend against a sanctions order

before the agency prior to reaching federal court, but rather

that the choice petitioners in that case faced--incur penalties

for noncompliance or challenge a rule at random--made federal

judicial review not meaningfully accessible. See 561 U.S.

at 490; see also Thunder Basin, 510 U.S. at 218. That concern

is not present here, because the SEC has instituted disciplinary

proceedings against Bennett and she can pursue her claims

through the administrative scheme. 13

13
Other cases in which the Supreme Court has concluded that
post-proceeding judicial review was not meaningful are
distinguishable because they involved proceedings that “posed a
risk of some additional and irremediable harm beyond the burdens
associated with the dispute resolution process.” Tilton, 824
F.3d at 286. In McNary v. Haitian Refugee Center, Inc., the
Court allowed a class of undocumented aliens to raise a due-
process challenge to immigration proceedings in district court,
rather than pursue eventual review in a court of appeals
pursuant to the statutory scheme, in part because most aliens
could “ensure themselves review in courts of appeals only if
they voluntarily surrender[ed] themselves for deportation,” a
“price . . . tantamount to a complete denial of judicial review
for most undocumented aliens.” 498 U.S. 479, 496–97. In
Mathews v. Eldridge, the Court allowed a recipient of Social
Security disability benefits to raise a due-process challenge to
administrative exhaustion requirements in district court because
“his physical condition and dependency upon the disability
benefits [meant] an erroneous termination would damage him in a
(Continued)
25
 In short, we conclude Bennett can obtain meaningful

judicial review of her constitutional claims under § 78y by

proceeding in the administrative forum and raising her claims in

a federal court of appeals in due course.

2.

Turning to the second Thunder Basin factor, the reference

point for determining whether a claim is “wholly collateral” is

not free from ambiguity. On the one hand, the Supreme Court has

compared the merits of a constitutional claim to the substance

of the charges at issue. See Eldridge, 424 U.S. at 330

(concluding that due-process claim was “entirely collateral to

[the] substantive claim of entitlement”). On the other hand,

the Court has considered whether a claim is “wholly collateral

to [the] statute’s review provisions.” Elgin, 132 S. Ct.

at 2136 (quoting Free Enterprise, 561 U.S. at 489). Under this

standard, claims are not wholly collateral when they are “the

vehicle by which [petitioners] seek to reverse” agency action.

Id. at 2139.

Bennett argues for the first reading: Her constitutional

claim is “wholly collateral” to the proceeding “because it

challenges the legality of the forum itself and does not seek to

way not recompensable through retroactive payments.” 424 U.S.
319, 331 (1976). Bennett has not shown that she will suffer
similar irreparable injury.

26
affect the merits of [the] SEC proceeding.” Appellants’ Br.

at 40. At one level, this makes conceptual sense: Even if she

is successful in challenging the appointment of the Commission’s

ALJs, the SEC could still bring a civil enforcement action in

district court on the same substantive charges.

However, we think the second reading is more faithful to

the more recent Supreme Court precedent, even though it reduces

the factor’s independent significance. Moreover, we are joined

in that interpretation by several of our sister circuits that

have considered the issue. See Jarkesy, 803 F.3d at 22–23;

Tilton, 824 F.3d at 287–88. But see Bebo, 799 F.3d at 773–74

(declining to decide among interpretations); Hill, 825 F.3d

at 1251–52 (same).

Bennett’s claim appears to be the “vehicle by which she

seeks” to vacate the ALJ’s initial findings. Elgin, 132 S. Ct.

at 2139. Indeed, the SEC investigated her for three years, but

she did not file suit in district court until after the SEC

instituted proceedings before the ALJ. 14 Free Enterprise--which

focused on whether the claim was procedurally-entwined with the

14 Bennett argues that if she had brought a pre-enforcement
challenge in district court, the SEC would have moved to dismiss
her claim as premature. How the SEC would have responded in
this situation, let alone how a court would have ruled, is an
attenuated hypothetical that cannot meaningfully inform our
review. The fact remains that Bennett did not bring such a
challenge.

27
proceeding--is instructive. There, “[p]etitioners’ general

challenge to the Board [wa]s ‘collateral’ to any Commission

orders or rules from which review might be sought.” See 561

U.S. at 490. Here, by contrast, Bennett’s claim arises out of

the enforcement proceeding and provides an affirmative defense.

If she succeeds, Bennett will invalidate a Commission order.

Therefore, her claim is not wholly collateral.

3.

The third Thunder Basin factor--agency expertise--also

points toward precluding district-court jurisdiction. Bennett

argues that her challenge to the constitutional sufficiency of

ALJ appointments lies outside the SEC’s expertise. Free

Enterprise held as much, reasoning that an Appointments Clause

challenge to the PCAOB raised only “standard questions of

administrative law,” rather than “fact-bound,” industry-

specific, or technical inquiries on which the SEC has special

“competence and expertise.” 561 U.S. at 491. Subsequently,

however, in Elgin the Supreme Court “adopted a broader

conception of agency expertise in the jurisdictional context.”

Tilton, 824 F.3d at 289; see also Hill, 825 F.3d at 1250–51;

Bebo, 799 at 771; Jarkesy, 803 F.3d 28–29. There, the Court

held that Congress had precluded jurisdiction, reasoning that

the Merit Systems Protection Board could “apply its expertise”

to “threshold questions that may accompany a constitutional

28
claim” against a federal statute, even when the agency

disclaimed authority to resolve those constitutional claims.

Elgin, 132 S. Ct. at 2140. The Court noted that the agency

“might fully dispose of the case” or “alleviate constitutional

concerns” by resolving “preliminary questions” or statutory

questions it “routinely considers.” Id. Thus, the agency’s

expertise could “be brought to bear.” Id.

The Commission could bring its expertise to bear here by

concluding that the Division of Enforcement’s substantive claims

are meritless, thereby fully disposing of the case before

reaching the constitutional question. Indeed, the Supreme Court

has emphasized that “one of the principal reasons to await the

termination of agency proceedings is ‘to obviate all occasion

for judicial review.’” Standard Oil, 449 U.S. at 244 n.11

(quoting McGee v. United States, 402 U.S. 479, 484 (1971)).

Although that may be unlikely to occur here, given that Bennett

has apparently eschewed all other defenses, 15 as a matter of law,

under Elgin the agency-expertise factor points toward precluding

district-court jurisdiction.

15Neither Bennett nor her counsel appeared at the initial
hearing. Bennett Grp. Fin. Servs., LLC, Exchange Act Release
No. 1033, 2016 WL 4035560, at *2 (ALJ July 11, 2016) (default
decision). Bennett does not challenge the merits or details of
the specific SEC proceeding. Appellants’ Br. at 2.

29
 IV.

In § 78y, Congress established a comprehensive process for

exclusive judicial review of final Commission orders in the

federal courts of appeals. From the text and structure of the

statute, it is fairly discernible that Congress intended to

channel all objections to such orders--including challenges

rooted in the Appointments Clause--through the administrative

adjudication and judicial review process set forth in the

statute. The three Thunder Basin factors indicate that

Bennett’s claims are of the type Congress intended to be

reviewed within this framework. If the Commission rules against

her, Bennett can obtain meaningful judicial review of her

constitutional claims in a competent Article III court in due

course. The wholly collateral and agency expertise factors also

point toward preclusion.

Adopting Bennett’s argument would provide no limiting

principle: Anyone could bypass the judicial-review scheme

established by Congress simply by alleging a constitutional

challenge and framing it as “structural,” “prophylactic,” or

“preventative.” That conflicts with Elgin’s admonition that

distinguishing among types of constitutional claims for

jurisdictional purposes is a fool’s errand. And it conflicts

with established precedent that Congress has the power to

channel statutory and constitutional claims into administrative

30
adjudication in the first instance, so long as it provides for

judicial review in an Article III court. Cf. Crowell v. Benson,

285 U.S. 22 (1932). Bennett cannot short-circuit that process.

Accordingly, the judgment of the district court is

AFFIRMED.

31