In recent months, defendants in multiple SEC cases that the agency has brought as administrative proceedings have shot back as plaintiffs in federal court claiming that the SEC's use of these "APs" is unconstitutional. On December 11, 2014, the SEC prevailed in the first of these challenges to be decided by a federal court in the case of Chau v. SEC.
In the Chau case, U.S. Judge Lewis A. Kaplan of the SDNY ruled that the federal court did not have subject matter jurisdiction to consider the claim that the SEC’s choice to pursue the case at issue administratively (as opposed to in federal court) deprived the plaintiffs of their rights to due process and equal protection of law. Judge Kaplan noted that "Congress has provided the SEC with two tracks on which it may litigate certain cases. Which of those paths to choose is a matter of enforcement policy squarely within the SEC’s province."
On Friday, January 16, 2015, the latest challenge to the SEC's use of APs came in a case filed in federal court by Barbara Duka, a former official at Standard & Poor's. Notably, Duka filed her case before the SEC has brought any AP against her and before the Commission has even held its vote on whether to proceed with the enforcement action. In her lawsuit, Duka stated that she received a "Wells notice" from the agency indicating that she might soon face an AP. She also stated that she believes that an AP against her is "imminent" as the SEC will reportedly vote on whether to pursue the matter against her on Tuesday, January 20.
Reuters reports that Duka's lawsuit specifically challenges the "constitutionality of legal provisions that create and provide position and tenure protections for the administrative law judges."