Appeals Court Will Not Rehear SEC Administrative Judge Suit

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By Antoinette Gartrell

The Securities and Exchange Commission lost its bid to persuade the full Tenth Circuit to review a panel’s ruling that the agency’s administrative law judges are unconstitutionally appointed ( Bandimere v. SEC , 10th Cir., No. 15-09586, 5/3/17 ).

Only two circuit judges voted to grant the rehearing, while a majority rejected the request, the appeals court said in a May 3 order.

The original decision late last year created a circuit split with the U.S. Court of Appeals for the District of Columbia Circuit, which has agreed to reconsider its panel’s opinion. If the D.C. Circuit reverses, Supreme Court review would be unlikely, as there would no longer be a circuit split.

Petition Denied

In 2013, an SEC ALJ held that Colorado businessman David Bandimere acted as an unlicensed broker in connection with a Ponzi scheme. The commission upheld the ALJ’s decision and Bandimere appealed to the Tenth Circuit. Among other matters, Bandimere claimed the ALJ in his case wasn’t appointed to his post in the proper way—that is, by the president, a federal judge or the head of the agency.

In December, a Tenth Circuit panel parted with the D.C. Circuit and agreed with Bandimere that the appointment of SEC ALJ’s violated the Constitution’s Appointments Clause.

In March, the agency asked the full appeals court to review the panel’s decision saying its judges aren’t “officers” who face Appointments Clause restrictions on their employment.

Disagreeing with the rehearing denial, Judges Carlos F. Lucero and Nancy L. Moritz said full circuit review is proper because the majority opinion doesn’t accord proper deference to the constitutional structure of checks and balances. They also said the impact of the opinion will be substantial, as it presents a threat of disruption throughout the government and doesn’t take into consideration the procedural protections found in the Administrative Procedure Act.

To contact the reporter on this story: Antoinette Gartrell in Washington at agartrell@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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