Vedder Price

Judicial Developments

The conference also included a panel featuring several litigators from the Division.  This panel addressed recent statutory and litigation developments.    

Challenges to Administrative Proceedings: SEC v. Cochran

Michael Conley, Solicitor, Daniel Staroselsky, Senior Appellate Counsel, and Dominick Freda, Assistant General Counsel, discussed challenges to administrative proceedings and SEC v. Cochran, which was one of the most recent cases to go to the Supreme Court.  According to the panel, the Supreme Court will consider whether a district court may hear a suit where the respondent in an administrative proceeding is seeking to have the proceeding enjoined on the basis of statutory defects.  The panel noted that Cochran—whose case comes out of the Fifth Circuit and was consolidated with a case from the Ninth Circuit raising similar issues—questioned whether the Commission’s Administrative Law Judge tenure violates Article II of the U.S. Constitution and whether the administrative adjudication process violates the due process clause.  The panel recounted the history of the case, noting that the district court held that challenges to an ongoing administrative proceeding must proceed within a court of appeals (as opposed to being heard by a district court while the administrative proceeding is pending), that Cochran then appealed the decision which was first affirmed by the Fifth Circuit and then reheard en banc and reversed in part, with the majority finding that the district court had authority over the Article II claim.  The panel noted that the Commission appealed the ruling, and the Supreme Court granted certiorari due to the circuit split.  

Challenges to No Admit/No Deny 

Michael Conley and Jeffrey Berger, Senior Appellate Counsel, discussed challenges to the No Admit/No Deny policy for consent judgments.  The group first discussed the origins of the No Admit/No Deny policy, originally adopted in 1972, which permits defendants settling with the Commission to settle without admitting to the alleged wrongdoing but also prohibits settlement unless the defendant agrees not to deny the alleged misconduct.  The objective of the policy, according to the SEC, is to prevent the factual basis for the settlement from being called into question and to preserve the Commission’s ability to seek relief in court should the defendant breach the agreement.  

The SEC panel noted that, in 2011, a judge in the United States District Court for the Southern District of New York refused to enter a consent judgment due to the “no admit” part of the policy and that the Commission appealed the order to the Second Circuit which held that it was an abuse of discretion to require admissions prior to entry of a consent judgment.  The panel also identified challenges to the “no deny” part of the policy, specifically a 2016 challenge by an individual who had entered into a consent judgment with the Commission 13 years earlier.  According to the panel, he invoked Federal Rule of Civil Procedure 60(b)(4), arguing that the “no deny” clause made the judgment partially void by violating his first amendment rights by precluding him from denying the allegations in the complaint.  The panel stated that the district court agreed with the Commission and denied the Rule 60(b)(4) motion, and that this denial was affirmed by an appellate court.  The panel identified two other cases addressing similar challenges (one in the D.C. Circuit and one in the Fifth Circuit), and stated that all such challenges have been unsuccessful so far, but it is clear that individuals are interested in this issue.

Post-Liu Developments

Michael Conley, Jeffrey Berger, and Kerry Dingle, Senior Appellate Counsel, discussed post-Liu developments.  In Liu, a case involving the statute of limitations for a disgorgement remedy, the Supreme Court remanded for recalculation of the disgorgement, and the district court entered a revised disgorgement order.  Liu appealed the court’s calculation of expenses and imposition of joint and several liability.  The Ninth Circuit affirmed the disgorgement, agreed with the district court that each of the purported expenses claimed were ill-gotten gains or made in furtherance of fraud, and found no error in holding the defendants jointly and severally liable.  

The SEC panel also stated that, as a general principle, courts follow pre-Liu precedent that after the Commission establishes profits, the burden shifts to the defendants to show that the figure is not reasonable and to prove reasonable expenses.  The panel further noted that, post-Liu, courts have held that wrongdoers may be liable on their own as well as jointly and severally liable for concerted wrongdoing.  The panel stated that it remains an open question as to whether, under Section 21(d)(5) of the ’34 Act, equitable principles allow the deposit of disgorged funds into the Treasury when it is infeasible to return the funds to investors—an issue left to lower courts by the Supreme Court’s Liu ruling.

Insider Trading: SEC v. Clark

Michael Conley, Dominick Freda, and David Lisitza, Senior Appellate Counsel, discussed insider trading and SEC v. Clark.  In Clark, the Commission alleged that Clark made over $200,000 from buying short-term out-of-the-money call options shortly before a merger, based on a tip from his brother-in-law who worked at one of the companies involved in the merger.  The case went to trial in the United States District Court for the Eastern District of Virginia.  The SEC panel noted that, after the Commission rested its case, Clark’s counsel orally moved for judgment as matter of law pursuant to Federal Rule of Civil Procedure 50(a), arguing that the Commission presented no direct evidence that a tip had occurred and that the time for the Commission to meet its burden for evidence had come and gone.  The SEC panel noted that the court granted this motion in a short ruling from the bench, and that they believe the court disregarded the Commission’s evidence, improperly weighed that evidence, and made credibility determinations that should have been left to jury.  The panelists further stated their belief that the court ignored most of the Commission’s evidence regarding concealment and made inappropriate credibility determinations, and that the Commission has appealed the ruling, that briefing was completed in July, and that oral argument is not yet scheduled.


Junaid A. Zubairi


Rachel T. Copenhaver


Brooke E. Conner


Matthew A. Rossi


Marie E. Christiansen


Nusra Ismail


Francisca T. Wolfenson Chimenelli


Eric Hyla


Michael J. Quinn


Ryan S. Hedges