Frank Harmon Black and Southeast Investments, N.C., Inc. v. Securities and Exchange Commission and Financial Industry Regulatory Authority

Summary

The United States District Court for the Western District of North Carolina grants FINRA’s motion to dismiss for lack of subject-matter jurisdiction and denies the parties’ pending summary-judgment motions and the plaintiffs’ motion for a speedy hearing as moot. The court concludes that the Exchange Act’s statutory review scheme, together with the completion of the FINRA and SEC proceedings and the availability of review in the Fourth Circuit, deprives the district court of jurisdiction over the plaintiffs’ constitutional challenges to FINRA and SEC adjudication. The action concerns Appointments Clause, nondelegation, due process, and jury-trial challenges.

Holdings

1. The Exchange Act's statutory review scheme, under which agency proceedings are followed by judicial review in the appropriate court of appeals, deprived the district court of jurisdiction because plaintiffs' agency proceedings had concluded and their constitutional claims could receive meaningful review in the Fourth Circuit.
2. Plaintiffs' jury-trial claim, as well as their Appointments Clause and private-nondelegation claims, constituted structural constitutional challenges materially similar to those recognized in Axon and Free Enterprise Fund.
3. Plaintiffs' damages theory did not provide a basis for proceeding because the SEC and FINRA are immune from the asserted damages claims for their regulatory conduct.

Questions Presented

1. Whether the Exchange Act's administrative-review and court-of-appeals review scheme deprived the district court of subject-matter jurisdiction over plaintiffs' structural constitutional challenges to FINRA and SEC adjudication.
2. Whether the timing and posture of the completed administrative proceedings distinguished plaintiffs' claims from the collateral-review exception recognized in Axon Enterprise, Inc. v. Federal Trade Commission and Free Enterprise Fund v. Public Company Accounting Oversight Board.
3. Whether plaintiffs' request for nominal damages supplied a basis for district-court jurisdiction despite the Exchange Act review scheme and asserted immunity of FINRA and the SEC.

Disposition

dismissed