Cato Institute v. Securities and Exchange Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 12, 2020 Decided July 6, 2021
No. 20-5054
CATO INSTITUTE,
APPELLANT
v.
SECURITIES AND EXCHANGE COMMISSION, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:19-cv-00047)
Robert J. McNamara argued the cause for appellant. With
him on the briefs was Jaimie N. Cavanaugh. Paul M. Sherman
entered an appearance.
Bruce D. Brown, Katie Townsend, and Lisa B. Zycherman
were on the brief for amici curiae Reporters Committee for
Freedom of the Press in support of appellant.
Jeffrey A. Berger, Senior Litigation Counsel, Securities
and Exchange Commission, argued the cause for appellees.
With him on the brief were Michael A. Conley, Solicitor, and
Dina B. Mishra, Senior Counsel. Melinda Hardy, Assistant
General Counsel, entered an appearance.

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Before: WILKINS and KATSAS, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed PER CURIAM.
PER CURIAM: The Cato Institute (“Cato”) brought suit
against the Securities and Exchange Commission (“SEC”),
claiming that the SEC’s practice of including no-deny
provisions in its consent decrees violates the First Amendment.
The District Court found that Cato had failed to allege an injury
in fact, and so dismissed Cato’s suit for lack of standing. We
affirm the District Court’s dismissal on the alternate ground
that Cato’s alleged injury is not redressable through this
lawsuit.
I.
On January 9, 2019, Cato filed a complaint in the District
Court against the SEC and its chairman and secretary in their
official capacities, challenging the SEC’s practice of including
no-deny provisions in its consent decrees in civil and
administrative proceedings. Consent decrees are
“compromises in which the parties give up something they
might have won in litigation and waive their rights to
litigation.” United States v. ITT Cont’l Baking Co., 420 U.S.
223, 235 (1975). “Because of its limited resources, the SEC
has traditionally entered into consent decrees to settle most of
its injunctive actions.” SEC v. Clifton, 700 F.2d 744, 748 (D.C.
Cir. 1983). Defendants who enter into consent decrees with the
SEC gain certain benefits: they may settle the complaint
against them without admitting the SEC’s allegations, and
often “seek and receive concessions concerning the violations
to be alleged in the complaint, the language and factual
allegations in the complaint, and the collateral, administrative
consequences of the consent decree.” Id. Since 1972,

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however, the SEC has adhered to a policy “not to permit a
defendant or respondent to consent to a judgment or order that
imposes a sanction while denying the allegations in the
complaint or order for proceedings,” so as “to avoid creating,
or permitting to be created, an impression that a decree is being
entered or a sanction imposed, when the conduct alleged did
not, in fact, occur.” Consent Decrees in Judicial or
Administrative Proceedings, 37 Fed. Reg. 25,224, 25,224
(Nov. 29, 1972) (codified at 17 C.F.R. § 202.5(e)). Cato
contends that the SEC has applied this policy to prohibit
defendants from denying any allegations made against them by
the SEC, including allegations to which their consent decree
did not require them to admit. Because SEC defendants are
prohibited from denying any allegations against them, they are
unable, according to Cato, to report publicly that the SEC
threatened them with unfounded charges or otherwise coerced
them into entering into consent decrees. Thus, according to
Cato, the SEC’s application of 17 C.F.R. § 202.5(e)
impermissibly stifles public discussion of the SEC’s
prosecutorial tactics.
Cato itself has not entered into any consent decree with the
SEC, but it alleges that it has contracted to publish a certain
manuscript (“the manuscript”) written by someone who is
subject to such a consent decree. Cato alleges that it cannot
publish the manuscript because the consent decree prohibits the
author from disputing any allegations made by the SEC against
him, which, in the manuscript, he does. Cato also alleges that
it has been contacted by other individuals who have entered
into similar consent decrees with the SEC. Cato claims that but
for the provisions of their consent decrees forbidding them
from disputing the SEC’s allegations against them, these
individuals would be willing to participate in panel discussions
hosted by Cato on the topic of the SEC’s prosecutorial
overreach, and to allow Cato to publish their testimonials in
articles and blog posts.

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Cato seeks six forms of relief: (1) a declaratory judgment
that 17 C.F.R. § 202.5(e) as interpreted and enforced by the
SEC is unconstitutional under the First Amendment; (2) a
permanent injunction against the enforcement of 17 C.F.R. §
202.5(e); (3) a declaratory judgment that the no-deny provision
of the consent decree entered into by the manuscript’s author is
unenforceable as a matter of law; (4) a declaratory judgment
that all no-deny provisions in the SEC’s past consent decrees
are unenforceable; (5) a permanent injunction prohibiting the
SEC from continuing its practice of non-discretionary use of
no-deny provisions in civil and administrative settlements; and
(6) all further and equitable relief as the Court may deem just
and proper. Cato’s complaint invokes the First Amendment
and the Declaratory Judgment Act, 28 U.S.C. § 2201, and it
presumably intends to use a declaratory judgment as the
predicate for an injunction and further relief pursuant to 28
U.S.C. § 2202. See Powell v. McCormack, 395 U.S. 486, 499
(1969).
On February 10, 2020, the District Court issued an order
and memorandum opinion dismissing Cato’s complaint for
lack of standing. The District Court found that Cato had failed
to allege an injury in fact because the SEC’s no-deny
provisions did not apply to Cato, and because Cato had “not
alleged that there is any actual impediment to its exercise of its
contractual rights to publish the book, to its sponsorship of a
panel discussion, or to its promotional activities. . . . [or that]
any specific action is threatened or even contemplated against
it.” Cato Inst. v. SEC, 438 F. Supp. 3d 44, 52 (D.D.C. 2020)
(quoting United Presbyterian Church in the U.S.A. v. Reagan,
738 F.2d 1375, 1378 (D.C. Cir. 1984)) (internal quotation
marks omitted). The District Court also found that Cato could
not allege that it had been denied the right to receive
information, because “it received and is fully aware of the
contents of the author’s manuscript.” Id. at 54.

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Cato timely appealed to this Court for review of the
District Court’s order on March 3, 2020.
II.
We review de novo the District Court’s dismissal of Cato’s
claim for lack of standing. Renal Physicians Ass’n v. U.S.
Dep’t of Health & Human Servs., 489 F.3d 1267, 1273 (D.C.
Cir. 2007). In doing so, we assume the truth of all material
factual allegations in Cato’s complaint and construe the
complaint liberally, granting Cato the benefit of all reasonable
inferences that can be derived from the facts alleged. See Am.
Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011).
We also assume that Cato will prevail on the merits of its suit
and obtain the relief it seeks. Committee on the Judiciary of
the U.S. House of Representatives v. McGahn, 968 F.3d 755,
762 (D.C. Cir. 2020) (en banc).
Cato bears the burden of establishing standing for each
form of relief it seeks. See Davis v. Fed. Election Comm’n, 554
U.S. 724, 734 (2008). The irreducible constitutional minimum
of standing contains three elements: injury in fact, causation,
and redressability. Lujan v. Defs. of Wildlife, 504 U.S. 555,
560–61 (1992). To demonstrate injury in fact, Cato must show
that its injury is concrete—i.e., that it “actually exist[s],”
Spokeo, Inc. v. Robins, 136 S. Ct 1540, 1548 (2016); that it is
particularized—i.e., that it “affect[s] the plaintiff in a personal
and individual way,” Lujan, 504 U.S. at 560 n.1; and that it is
imminent—i.e., that there is a “substantial probability of
injury,” Chamber of Commerce v. EPA, 642 F.3d 192, 200
(D.C. Cir. 2011) (cleaned up). To demonstrate causation, Cato
must show a “fairly traceable connection” between the
complained-of conduct of the defendant and the injury claimed.
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103 (1998).
And to demonstrate redressability, Cato, whose alleged injury
arises from the government’s regulation of a third party, must

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show that there is a “substantial probability” that “if the court
affords the relief requested, the injury will be removed.”
Chamber of Commerce, 642 F.3d at 201 (quoting Warth v.
Seldin, 422 U.S. 490, 504 (1975)) (alterations omitted).
Cato’s alleged injury is that it is prevented from publishing
speech by certain SEC defendants averring that the SEC
threatened them with unfounded charges or otherwise coerced
them into entering settlement agreements. Cato alleges that it
would be able to publish this speech but for the fact that the
SEC defendants are subject to no-deny provisions forbidding
them from disputing the SEC’s allegations against them and are
therefore unable and unwilling to allow Cato to publish their
speech.
The fatal stumbling block for Cato is that even assuming
that it will prevail on the merits and obtain the relief it seeks,
Cato’s alleged injury would not be redressed. That is because
the no-deny provisions that bind the SEC defendants whose
speech Cato wishes to publish are contained in consent decrees.
“A consent decree no doubt embodies an agreement of the
parties and thus in some respects is contractual in nature. But
it is an agreement that the parties desire and expect will be
reflected in, and be enforceable as, a judicial decree that is
subject to the rules generally applicable to other judgments and
decrees.” Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367,
378 (1992). Violations of court orders are punishable by
criminal contempt, see United States v. United Mine Workers,
330 U.S. 258, 294 (1947), and a court may institute criminal
contempt proceedings against an SEC defendant who violates
a no-deny provision contained in a consent decree issued by
that court even absent the SEC’s consent, see Young v. U.S. ex
rel. Vuitton et Fils S.A., 481 U.S. 787, 793–95 (1987);
Morrison v. Olson, 487 U.S. 654, 676 (1988). So regardless of
whether the SEC is enjoined from seeking to enforce the no-
deny provisions in its consent decrees, the courts that issued the

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consent decrees would still be able to enforce the no-deny
provisions contained therein. And a merits opinion from this
Court holding the no-deny provisions to be in violation of
Cato’s rights would not bind district courts “in jurisdictions
around the country” from enforcing their own judgments. Am.
Compl. ¶ 42. (It is “established doctrine that persons subject
to an injunctive order issued by a court with jurisdiction are
expected to obey that decree until it is modified or reversed,
even if they have proper grounds to object to the order.” GTE
Sylvania, Inc. v. Consumers Union of the U.S., 445 U.S. 375,
386 (1980).) Moreover, Cato expressly disclaims that it seeks
an order controlling how a district court—even a District of
Columbia district court—enforces its particular consent decree.
Reply Br. at 24–25. Instead, Cato seeks only to enjoin the SEC
from threatening to enforce a decree or settlement or from
taking steps to enforce a decree or settlement. Id. Therefore,
even assuming that Cato prevails on the merits and obtains the
relief it seeks, the SEC defendants would remain unable to
allow Cato to publish their speech, and Cato’s injury would not
be redressed.
The cases upon which Cato primarily relies—Overbey v.
Mayor of Baltimore, 930 F.3d 215 (4th Cir. 2019), and Pitt
News v. Fisher, 215 F.3d 354 (3d Cir. 2000)—are not to the
contrary. In Overbey, the Fourth Circuit found that plaintiffs
had standing to challenge the Baltimore Police Department’s
use of non-disparagement clauses in its settlement agreements.
930 F.3d at 226–230. The Fourth Circuit did not find that the
Baltimore Police Department’s settlement agreements were
incorporated in consent decrees, and even if it had, those
consent decrees all would have likely been issued by Maryland
courts within the Fourth Circuit. More importantly, however,
the Fourth Circuit did not analyze redressability, and so its
opinion established no precedent on that issue. See Steel Co.,
523 U.S. at 91. In Pitt News v. Fisher, the Third Circuit found
that plaintiffs had standing to challenge a Pennsylvania law the

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enforcement of which they alleged would violate their First
Amendment rights. 215 F.3d at 358. Plaintiffs’ injury was
redressable in that case because were they to succeed on the
merits, enforcement of the law would be enjoined. Id. at 361;
see also Pitt News v. Pappert, 379 F.3d 96 (3d Cir. 2004)
(same). By contrast, were Cato’s suit to succeed, enforcement
of the no-deny provisions would not be enjoined for the reasons
given above.
Cato also asserts in its briefing that SEC defendants are
sometimes bound by no-deny provisions that are not part of a
consent decree or incorporated by reference into a final
judgment, see Appellant Br. at 7 n.2; Reply Br. at 24. The
District Court, however, construed Cato’s complaint to allege
that the SEC defendants whose speech Cato wishes to publish
are bound by no-deny provisions contained in consent decrees.
See Cato Inst. v. SEC, 438 F. Supp. 3d at 47 (“Plaintiff alleges
that the SEC has carried out this policy by requiring that an
express ‘no-deny’ provision be included in the consent
judgment as a condition of settling any civil or administrative
action brought by the agency.”). We find no error in that
construction. Indeed, the regulation whose application Cato
challenges in its complaint, 17 C.F.R. § 202.5(e), refers
specifically to consent decrees. See Consent Decrees in
Judicial or Administrative Proceedings, 37 Fed. Reg. at 25,224;
Am. Compl. ¶¶ 13–30. Moreover, Cato has neither alleged in
its complaint, nor asserted in its briefing, that the no-deny
provisions that bind the SEC defendants whose speech it
wishes to publish are not part of a consent decree or
incorporated by reference into a final judgment. When
assessing standing at any stage of the litigation, we do not
accept inferences that are unsupported by the facts alleged in
the complaint. In re U.S. Office of Pers. Mgmt. Data Sec.
Breach Litig., 928 F.3d 42, 54 (D.C. Cir. 2019). We therefore
construe the complaint, as did the District Court, to allege that

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the SEC defendants whose speech Cato wishes to publish are
bound by no-deny provisions contained in consent decrees.
Because the SEC defendants whose speech Cato wishes to
publish are bound by no-deny provisions contained in consent
decrees, and because an order from this Court enjoining the
SEC from seeking to enforce its consent decrees would not
prevent the courts that entered those decrees from enforcing the
no-deny provisions therein, Cato’s injury is not redressable
through this suit. Cato therefore lacks standing and its
complaint must be dismissed. See Steel Co., 523 U.S. at 109–
110.
So ordered.

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