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Supreme Court will study new effort to rein in SEC judges

Adding two cases to their arguments calendar, the justices will consider another challenge to the authority of administrative judges.

WASHINGTON (CN) — Four years after the Supreme Court cracked down on how judges are appointed within the Securities and Exchange Commission, the justices took up a case Monday that says these agency decision-makers are unconstitutionally insulated from removal.

The case at hand involves Michelle Cochran, an accountant whom the SEC hit with a $22,500 fine for not meeting federal auditing standards in quarterly reviews between 2010 and 2013. While the agency was considering the penalty imposed against Cochran by one of the SEC's administrative law judges, her case hit a detour in light of an intervening Supreme Court decision on how SEC judges are appointed.

At the time, the judges at the SEC came to power via appointed by agency staff members. In 2018, however, the Supreme Court ruled in Lucia v. SEC that such officers must be appointed by the president, a court of law or a department head per the Appointments Clause. Cochran's case was reassigned to a properly appointed judge, but she said there was a new problem: that ALJs, as such judges are known, are unconstitutionally insulated from the president’s Article II removal power through multiple layers of “for-cause” removal protection.

The SEC is appealing after the en banc Fifth Circuit found that the courts should hear Cochran's challenge.

“We are thrilled that the Supreme Court has granted cert. ... Federal courts have an unflagging duty to enforce the Constitution before Americans like Michelle must endure years-long administrative adjudications that are predestined to be vacated on constitutional grounds," Peggy Little, senior litigation counsel at the New Civil Liberties Alliance, said in a statement. "May the SEC’s long reign of regulation by procedural evisceration end soon!” 

Per its custom, the Supreme Court did not issue any comment in taking up the case.

The agency's petition asks whether U.S. district courts have "jurisdiction to hear a suit in which the respondent in an ongoing Securities and Exchange Commission administrative proceeding seeks to enjoin that proceeding, based on an alleged constitutional defect in the statutory provisions that govern the removal of the administrative law judge who will conduct the proceeding."

Monday's list of orders from the high court contains dozens of rejected petitions. The only other one granted a writ of certiorari this morning comes from Marcus Deangelo Jones, who was convicted in 2000 of two counts of felon possession of a firearm and one count of making false statements to police.

Nearly two decades into his 27-year sentence, the Supreme Court raised the bar for prosecutors to secure convictions of felon-in-possession charges. In the 2019 case Rehaif v. U.S., the 7-2 court ruled that an individual cannot be guilty of a felon-in-possession charge if doesn't know that his gun possession is illegal.

Jones tells the Supreme Court now that Rehaif retroactively established that he is legally innocent of his felon-in-possession crime. He says the issue is that relief from his conviction was not available pre-Rehaif since his initial attempt at post-conviction relief occurred when there was no precedent in his favor.

It is the government's position, however, that Jones could have made the same argument that proved successful in Rehaif. The lower court dismissed his case for lack of jurisdiction, and he asks now whether he is eligible for retroactive relief.

Attorneys for Jones say the Eighth Circuit's holding against them pressures defedants "to dangerously stretch their interpretation of 'good faith' in the interest of protecting their clients’ rights."

"If they did not, for example, argue against long- settled precedent about what activities a statute made criminal, their clients might forever lose any ability to challenge their convictions — even if this Court were to later hold that the statute did not criminalize their behavior," the petition argues.

Federal circuit courts have long been divided over whether federally incarcerated people can petition for habeas relief if the crime of which they were convicted is later declared not to be a crime. The Eighth, 10th and 11th Circuits do not allow inmates to seek such relief, while eight other federal circuits allow post-conviction petitions in similar circumstances.

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