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Practice Point: A New ALJ Could Mean a Whole New Schedule

By Eric L. Lipman

As part of an opinion issued today, a panel of the U.S. Court of Appeals for the District of Columbia Circuit held that a federal Administrative Law Judge?s power to regulate the course of proceedings (under the Securities and Exchange Commission?s rules), included the power to revisit and revise the earlier orders of a predecessor ALJ.

In 2006, based upon Conrad Seghers? earlier violations of federal securities statutes, the SEC?s Enforcement Division sought to bar him from any future association with an investment adviser. Further, during proceedings before a federal ALJ on this effort, the Division sought leave to file papers in support of a motion for summary disposition. The ALJ denied the Division?s request and set the case on for an evidentiary hearing.

Shortly thereafter, the Seghers matter was reassigned to a successor ALJ. Following a prehearing conference with counsel, the successor ALJ vacated the hearing date and granted leave for the Division to file a motion for summary disposition. (Still later, both parties moved for summary disposition.)

Following the issuance of an Order granting the Division?s motion, and an Agency Order ?permanently barring Seghers from associating with any investment advisor,? Seghers sought review of the Agency action. Segher argued, in part, that the successor ALJ was without the authority to vacate the original scheduling order and to decide the matter on motions for summary disposition.

Disagreeing, Circuit Judge Karen LeCraft Henderson wrote for the panel:

We reject Seghers?s argument that ALJ Mahony was without authority to vacate the scheduled hearing and reconsider the Division?s motion for summary disposition. The SEC?s Rules of Practice authorize the ALJ to ?[regulate] the course of a proceeding and the conduct of the parties and their counsel.? The ALJ was authorized ? as part of regulating the course of the proceeding ? to consider the Division?s motion for summary disposition notwithstanding his predecessor?s denial thereof.

The panel?s complete analysis is accessible here.

Full post as published by Within the Scope on November 21, 2008 (boomark / email).