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The Georgia Republican Party, New York v. Securities and Exchange Commission

United States Court of Appeals, Eleventh Circuit

April 26, 2018

THE GEORGIA REPUBLICAN PARTY, NEW YORK REPUBLICAN STATE COMMITTEE, TENNESSEE REPUBLICAN PARTY, Petitioners,
v.
SECURITIES AND EXCHANGE COMMISSION, FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., Respondents.

          Petition for Review of a Decision of the Securities and Exchange Commission Agency No. 34-78683

          Before WILLIAM PRYOR and JULIE CARNES, Circuit Judges, and CORRIGAN, [*] District Judge.

          JULIE CARNES, Circuit Judge

         In 2015, the Financial Industry Regulatory Authority ("FINRA"), a self-regulatory organization operating under the auspices of the Securities and Exchange Commission, proposed adopting Rule 2030-a regulation governing the political contributions of FINRA members who solicit government officials for investment advisory services contracts. A year later, after notice and comment, the Commission issued an order approving the Rule.

         The Georgia Republican Party, the New York Republican State Committee, and the Tennessee Republican Party filed a petition challenging the Commission's order. They contend that the Commission lacked the authority to approve Rule 2030 and that the Rule violates the First Amendment. We, however, are unable to consider the petition's merits because the Georgia Party does not have standing to challenge the Rule and this Court is not the proper venue for either the New York Committee or the Tennessee Party. As a result, we dismiss the Georgia Party for lack of jurisdiction, and transfer the appeal of the remaining two parties to the United States Court of Appeals for the District of Columbia Circuit.

          I. BACKGROUND

         In 2010, the Commission enacted rules generally prohibiting investment advisors from "provid[ing] investment advisory services for compensation to a government entity within two years after a contribution to an official of the government entity." 17 C.F.R. § 275.206(4)-5(a)(1); see 75 Fed. Reg. 41018, 41068-69 (2010). The Commission's rules also prohibit investment advisors from using placement agents-persons who solicit government officials for investment advisory services contracts on behalf of investment advisers-unless such agents are "regulated person[s]" within FINRA. 17 C.F.R. § 275.206(4)-5(a)(2)(i)(A). The Commission's rules further prohibit investment advisers from working with placement agents unless FINRA enacts rules that prohibit these placement agents from "engaging in distribution or solicitation activities if certain political contributions have been made" and such rules are "substantially equivalent" to, or "more stringent" than, the Commission's comparable rules for investment advisers. Id. § 275.206(4)-5(f)(9)(ii).

         So, in 2015, FINRA proposed Rule 2030 to the Commission for adoption. 80 Fed. Reg. 81650, 81650-56 (2015); see 15 U.S.C. § 78s(b)(1) (requiring that self-regulatory organizations receive approval from the Commission before any rule change may take effect). Subject to some exceptions, Rule 2030 prohibits placement agents from "engag[ing] in distribution or solicitation activities for compensation with a government entity on behalf of an investment adviser that provides or is seeking to provide investment advisory services to such government entity within two years after a contribution to an official of the government entity." FINRA Rule 2030(a). Thus, if a placement agent makes a contribution to a government official, the placement agent must wait two years before it can solicit the employing governmental entity for an investment advisory services contract and be paid for doing so.

         Rule 2030 also includes provisions that attempt to prevent placement agents from circumventing the Rule by making indirect contributions to government officials. One such provision states that placement agents may not "solicit or coordinate any person or political action committee to make" payments "to a political party of a state or locality of a government entity with which the covered member is engaging in, or seeking to engage in, distribution or solicitation activities on behalf of an investment adviser." FINRA Rule 2030(b).

         In August 2016, after notice and comment, the Commission issued a final order approving the Rule. 81 Fed. Reg. 60051, 60051-52 (2016). In response, the Georgia Party, the New York Committee, and the Tennessee Party filed a joint petition in this Court under 15 U.S.C. § 78y(a), asserting that the Commission lacked the authority to approve Rule 2030 and that the Rule violates the First Amendment.

         II. DISCUSSION

         A. The Georgia Party Lacks Standing to Challenge Rule 2030.

         "Article III of the Constitution restricts [the judicial power] to the traditional role of Anglo-American courts, which is to redress or prevent actual or imminently threatened injury to persons caused by private or official violation of law." Summers v. Earth Island Inst., 555 U.S. 488, 492 (2009). Standing doctrine "reflect[s] this fundamental limitation" and "requires federal courts to satisfy themselves that the plaintiff has alleged such a personal stake in the outcome of the controversy as to warrant his invocation of federal-court jurisdiction." Id. at 493 (emphasis omitted) (internal quotation marks omitted). So, if a plaintiff lacks standing, then "federal courts do not have jurisdiction over his or her complaint." Stalley ex rel. U.S. v. Orlando Reg'l Healthcare Sys., Inc., 524 F.3d 1229, 1232 (11th Cir. 2008).

         "The party invoking federal jurisdiction bears the burden of establishing" standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). "Since [standing elements] are not mere pleading requirements but rather an indispensable part of the plaintiff's case, each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." Id. At the pleading stage "general factual allegations of injury . . . may suffice." Id. But in response to a summary judgment motion, "the plaintiff can no longer rest on such 'mere allegations, ' but must 'set forth' by affidavit or other evidence 'specific facts.'" Id. (quoting Fed.R.Civ.P. 56(e)). In this context, a petition for appellate review of a final agency order is more analogous to a motion for summary judgment, "in that both request a final judgment on the merits." Iowa League of Cities v. EPA, 711 F.3d 844, 869 (8th Cir. 2013). "Accordingly, parties seeking direct appellate review of an agency action must prove each element of standing as if they were moving for summary judgment in a district court." Id. Thus, petitioners "bear the responsibility of meeting the same burden of production, namely 'specific facts' supported by 'affidavit or other evidence.'" Id. at 870 (quoting ...


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