Feathers v. United States Securities and Exchange Commission

Background

Pro se plaintiff Mark Feathers sought a temporary restraining order, an emergency order intended to preserve the status quo, barring the Securities and Exchange Commission (SEC) from conducting administrative proceedings against him. The opinion says the proceedings related to a civil enforcement action in which an administrative law judge concluded that Feathers had violated federal securities laws in connection with investment funds he created and managed. The administrative law judge granted summary disposition for the SEC and barred Feathers from the securities industry. Feathers petitioned for review, and the petition was pending when the district court issued this order.

Feathers’s complaint asserted, to the extent the court could understand it, that he was being wrongfully prosecuted in violation of his constitutional rights and the Administrative Procedure Act. The complaint sought $5 million or more in damages from the SEC. The court described both the complaint and the temporary-restraining-order application as extremely thin and largely conclusory.

Dismissal of the Complaint

The court dismissed the complaint with leave to amend. It explained that a court may dismiss a complaint on its own initiative for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), or for failure to state a claim under Rule 12(b)(6). Rule 8(a)(2) requires a complaint to contain a short and plain statement showing that the plaintiff is entitled to relief, and the court said the complaint did not allege enough facts to make its claims plausible.

The court held that the complaint showed a lack of subject-matter jurisdiction because damages claims against the SEC were barred by sovereign immunity, which generally protects the United States and its agencies from being sued for money damages without a waiver. The court also said Feathers had not pleaded a claim under the Federal Tort Claims Act or shown compliance with that statute’s procedural requirements.

The court rejected Feathers’s suggestion that the complaint should be treated as seeking a determination that the SEC lacked authority to prosecute him. The court noted that the complaint contained a single demand for money damages and no other requested relief, and it said the court could not add essential elements that Feathers had not pleaded or create jurisdiction where none existed.

The court separately stated that the complaint failed under Rule 8 and Rule 12(b)(6). It said the complaint alleged no facts plausibly establishing constitutional torts or a violation of the Administrative Procedure Act. It also noted that damages for constitutional violations were unavailable against a federal agency, that the complaint did not identify SEC employees who might be liable under another theory, and that any final SEC order was reviewable only in the Ninth Circuit or the District of Columbia Circuit.

Although the court said amendment might be futile, it allowed Feathers, because he was representing himself, to file an amended complaint consistent with the order by January 13, 2023. The court stated that failure to meet that deadline would result in dismissal of the case with prejudice under Rule 41(b). The order itself dismissed the complaint with leave to amend; it did not state that the case was then dismissed with prejudice.

Temporary Restraining Order

The court denied the temporary restraining order. It applied the same standards used for a preliminary injunction, requiring a showing that the plaintiff was likely to succeed on the merits, likely to suffer irreparable harm without relief, that the balance of equities favored relief, and that an injunction would serve the public interest. The court said there was no plausible claim and therefore no likelihood of success on the merits. It also found no evidence supporting the other requirements for emergency injunctive relief.

Other Procedural Ruling

The court vacated the case-management conference that had been set for January 5, 2023. Judge James Donato signed the order on November 29, 2022.