Touche Ross & Company v. Securities and Exchange Commission

609 F.2d 570 (1979)

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Touche Ross & Company v. Securities and Exchange Commission

United States Court of Appeals for the Second Circuit
609 F.2d 570 (1979)

Facts

In September 1976, the Securities and Exchange Commission (SEC) (defendant) commenced an administrative proceeding pursuant to SEC Rule of Practice 2(e) to determine whether accounting firm Touche Ross & Company and three of its former partners (Touche) (plaintiffs) should be disciplined for engaging in unethical, unprofessional, or fraudulent conduct in connection with their audits of certain financial statements filed with the SEC. Before any hearings occurred, Touche sued the SEC and four of its commissioners (defendants) in federal court seeking, among other things, a declaratory judgment that (1) the rule exceeded the SEC’s statutory authority and jurisdiction by attempting to punish violations of the federal securities laws and (2) the administrative proceeding would violate Touche’s due-process rights because the SEC would not be impartial. In response, the SEC argued that the rule (a version of which had been enacted more than 40 years earlier and had never been found by a court to be invalid) was proper under the Securities Act of 1933. The SEC also argued that Touche’s suit was premature because Touche had not exhausted its administrative remedies. The district court granted the motion to dismiss. Touche appealed.

Rule of Law

Issue

Holding and Reasoning (Timbers, J.)

Concurrence (Kaufman, C.J.)

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