It was worth a try but, as predicted, a federal court has now dismissed one of the three lawsuits brought against the SEC last year for its alleged negligence in failing to detect the Bernard Madoff scheme. The dismissed case was brought by investors who alleged that the SEC "owes a duty of reasonable care to all members of the general public including all investors in U.S. financial markets who are foreseeably endangered by its conduct."  Citing the various failings on the part of the SEC set forth in the SEC Inspector General's report on the matter, the plaintiffs claimed that this duty was breached.

The Department of Justice moved to dismiss the case, however, arguing that under the Federal Tort Claims Act, the court lacked jurisdiction to hear claims related to federal officers who commit "discretionary" acts in the course of their jobs. U.S. District Judge Stephen V. Wilson agreed, the National Law Journal reports, ruling that [p]laintiffs in this case largely fail to identify any mandatory 'policies' or 'practices' that were violated in this case. Their Complaint and their moving papers do not contain any attempt to rebut the government's preliminary showing that the SEC retained discretion to decide when to investigate, how to investigate, and whether or not to take enforcement actions."

As discussed here, in December 2008, shortly after the initial administrative action was filed in one of the three cases, law professor Erwin Chemerinsky told me that he did not see a "viable suit for money damages against the United States” related to the SEC’s admitted failure to properly handle its probe of Madoff’s operation. “There is no liability for the United States even for gross negligence in the performance of a discretionary task,” he correctly predicted.