In the Headlines
November 4, 2022

Kavanaugh May Prove Unlikely SEC Ally in Accountant's Case


Securities Enforcement Defense attorney Scott Mascianica was quoted in a Law360 article about a U.S. Court of Appeals for the Fifth Circuit decision that the U.S. Securities and Exchange Commission (SEC) is now seeking to reverse and the role U.S. Supreme Court Justice Brett Kavanaugh may have in the ruling. The decision greenlighted a district court challenge brought by accountant Michelle Cochran, who was sued by the SEC in 2016 for allegedly failing to comply with auditing standards set by the Public Company Accounting Oversight Board. Ms. Cochran sued despite the ongoing nature of that administrative action, a step that five other circuit courts have ruled is not allowed.

"The Fifth Circuit opinion was really an outlier compared to the prior circuits," Mr. Mascianica said. "Whenever you are dealing with circuit splits, that's catnip for the Supreme Court."

One of the circuit courts that disagreed with the Fifth Circuit's Cochran decision was the D.C. Circuit. The ruling, endorsed by then-Circuit Judge Kavanaugh, found a hedge fund manager named George R. Jarkesy Jr. could not sue the SEC in federal court while an administrative proceeding against him was still pending.

With SEC v. Cochran now set to be heard by the Supreme Court, Mr. Mascianica said it wouldn't be surprising if the Jarskey decision was taken up as well. The question left to be decided by the high court is whether district courts have jurisdiction to hear structural constitutional challenges to the SEC's administrative proceedings before those proceedings take place. It remains to be seen if Justice Kavanaugh will side with his past self when ruling.

"Given the constitutional issues that are at the heart of the Jarkesy decision... it seems like there's so much there for the Supreme Court to take up and consider," said Mr. Mascianica. "It just strikes me that it would be extremely surprising for the Supreme Court not to take it up."

READ: Kavanaugh May Prove Unlikely SEC Ally in Accountant's Case

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