Securities and Exchange Commission v. Cochran
The Facts
Michelle Cochran was charged by the SEC in an administrative proceeding before an SEC Administrative Law Judge. She sought to challenge in federal district court the constitutionality of the SEC's appointment and removal protections for ALJs, citing Collins v. Yellen (2021) and Lucia v. SEC (2018). The Fifth Circuit held she could not bypass the administrative process to bring her constitutional claim immediately in district court, even though the SEC's ALJs would not rule on their own constitutionality.
The Application
Cochran's structural constitutional challenge satisfies Thunder Basin's exceptions to the exhaustion requirement: the constitutional claim is wholly collateral to the SEC's enforcement action, as it challenges the ALJ's appointment and removal protections rather than the merits of the securities violation. The SEC itself cannot authoritatively resolve whether its own institutional structure violates the Constitution, depriving the agency of competence to grant meaningful relief on the constitutional question. Requiring exhaustion would inflict irreparable harm by forcing Cochran to litigate the merits of the charge before a tribunal whose constitutional authority she challenges, with no guarantee of federal review until years of administrative proceedings conclude.
The Conclusion
**Decided April 14, 2022. The Court held unanimously that Cochran could bring her structural constitutional challenge in federal district court without first exhausting SEC administrative proceedings.** The Court applied Thunder Basin and held that the constitutional removal-protection claim was wholly collateral to the merits of the SEC enforcement action, the agency could not rule on its own constitutionality, and requiring full exhaustion would force the very harm she sought to avoid - years of proceedings before a constitutionally defective tribunal.
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Case Analysis
Overview
The Supreme Court held that a defendant in an SEC administrative enforcement proceeding has the right to bring a structural constitutional challenge. Arguing the agency's in-house judges are unconstitutionally insulated from presidential removal. In federal district court rather than being forced to litigate the constitutional claim only within the SEC's own administrative process, which would not rule on the claim until after years of proceedings.
Facts
Michelle Cochran was charged by the SEC in an administrative proceeding before an SEC Administrative Law Judge. She sought to challenge in federal district court the constitutionality of the SEC's appointment and removal protections for ALJs, citing Collins v. Yellen (2021) and Lucia v. SEC (2018). The Fifth Circuit held she could not bypass the administrative process to bring her constitutional claim immediately in district court, even though the SEC's ALJs would not rule on their own constitutionality.
Issue
Whether a defendant in a pending SEC administrative proceeding may bring a structural constitutional challenge to the agency's ALJ removal-protection provisions in federal district court at the outset of the proceeding, or must first exhaust the administrative process before seeking federal court review.
Rule
Exhaustion of administrative remedies is generally required before seeking judicial review of agency action. However, exceptions exist where the constitutional claim is 'wholly collateral' to the agency proceeding, where the agency lacks authority to grant the relief sought, and where requiring exhaustion would cause irreparable harm. Thunder Basin Coal Co. v. Reich (1994) provides the framework for determining when defendants may bypass administrative procedures to raise structural constitutional claims in federal court.
Analysis
Cochran's structural constitutional challenge satisfies Thunder Basin's exceptions to the exhaustion requirement: the constitutional claim is wholly collateral to the SEC's enforcement action, as it challenges the ALJ's appointment and removal protections rather than the merits of the securities violation. The SEC itself cannot authoritatively resolve whether its own institutional structure violates the Constitution, depriving the agency of competence to grant meaningful relief on the constitutional question. Requiring exhaustion would inflict irreparable harm by forcing Cochran to litigate the merits of the charge before a tribunal whose constitutional authority she challenges, with no guarantee of federal review until years of administrative proceedings conclude.
Conclusion
**Decided April 14, 2022. The Court held unanimously that Cochran could bring her structural constitutional challenge in federal district court without first exhausting SEC administrative proceedings.** The Court applied Thunder Basin and held that the constitutional removal-protection claim was wholly collateral to the merits of the SEC enforcement action, the agency could not rule on its own constitutionality, and requiring full exhaustion would force the very harm she sought to avoid. Years of proceedings before a constitutionally defective tribunal.
Notes
OT2022. Added via SCOTUS bulk import 2026-05-14
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