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Dembski v. Sec. & Exch. Comm'n

Court Lacks Jurisdiction Over Challenge to ALJ's Appointment But Would Have Dismissed Suit

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DECISION AND ORDER INTRODUCTION   Plaintiff Timothy M. Dembski (“Plaintiff”) filed this action against the Securities and Exchange Commission (“SEC” or “Defendant”) seeking a declaration that Defendant’s decision regarding Plaintiff violated the Appointments Clause of the Constitution and an order reinstating Plaintiff’s ability to participate in the securities industry. (Dkt. 2). Presently before the Court is Defendant’s motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt 10). Because the Court lacks subject matter jurisdiction over Plaintiff’s claims — an issue not raised by either party — the Complaint is dismissed. However, even if the Court possessed subject matter jurisdiction, Defendant’s motion to dismiss (Dkt. 10) would be granted. BACKGROUND The following facts are taken from Plaintiff’s Complaint (Dkt. 2) and the documents submitted from the underlying SEC proceeding (Dkt. 12).1 As is required at this stage of the proceedings, the Court has treated Plaintiff’s factual allegations as true. Plaintiff was the owner and managing partner of Reliance Financial Advisors, LLC (“Reliance”), an investment advisor business located in Buffalo, New York. (Dkt. 2 at 1). In September 2014, SEC staff members hired Jason S. Patil (“Patil”) as an administrative law judge (“ALJ”) at the SEC. (Id. at 26). On December 10, 2014, the SEC initiated proceedings against Plaintiff, Reliance, and a co-owner of Reliance under SEC Administrative Proceeding File No. 3-16311 (the “SEC Proceeding”). (Id. at 19). The SEC also issued a consent order on the same day against a Reliance employee in a separate proceeding. (Id. at 20). On January 9, 2015, ALJ Patil consolidated the two proceedings, and a hearing on the proceedings was held before ALJ Patil in May 2015. (Id. at

28-29). Reliance and Reliance’s co-owner later settled with the SEC. (Id. at 30). On January 11, 2016, ALJ Patil found that Plaintiff violated federal securities laws and permanently disbarred Plaintiff from the securities industry. (Id. at

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