6-19-24 *INTERVIEW* NCLA's Peggy Little on Lawsuit vs. SEC Settling Policy

Episode Transcript

(00:00):
My listeners know that I am somethingof a constitutional law nerd. I'm not
an attorney, but I think Igot a pretty good brain for this stuff,
and I love following this stuff.I love Supreme Court decisions and thinking
about them. And I was actuallytelling a friend yesterday that if I were
going to have a different career inlife, or if I were going to

(00:21):
go back and do my life differently. And I'm not saying I want to,
by the way, I'm happy withhow my life has worked out.
But one of the things I certainlywould have considered would to have been a
constitutional law attorney who spent all daysuing the government to protect people's rights.
And this is a story that fitswell into that. In fact, what

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the government is doing here is sogalling that, even though it's a little
bit in the legal weeds, Iwanted to share it with you, so
joining us to talk about this particularcase. Peggy Little, who has been
on the show multiple times in thepast. She's a your litigator with the
New Civil Liberties Alliance ncl A Legaldot Org. N c l A Legal

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dot org, and the headline ona piece they had recently in CLA asked
Ninth Circuit to end SEC's illegal gagrule. Peggy, with that long introduction,
welcome back to Kaway. It's goodto talk to you again. Thank
you, Ress. So tell uswhat's an issue. Well, the SEC

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fancies that it has the power torequire that anybody who wants to settle with
the agency after they've been charged bythe SEC, has to agree that they
will never question any of the chargesthe SEC brought against them for life.
They are gagged for life. Iwas astonished to learn that they had this

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rule. I published an op edpiece about it in the Wall Street Journal
eighteen and at the same time petitionof the agency to get rid of the
gag. And this has been avery long journey. I've tried to sue
in the Second Circuit, the FifthCircuit, and now we're in the Ninth

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Circuit. The earlier charge challenges morehad some procedural issues that the courts just
were not happy about reopening old judgmentsto free people from their gags. So
this time it's a different approach.We're in the Ninth Circuit Court of Appeals.
The SEC, after five years,denied my petition that I had filed

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on twenty eighteen, and they said, no, this is perfectly constitutional,
and we're going to keep on doingit. Commissioner SEC. Commissioner hester Perce
issued a stinging desfense, and weare now up at the Ninth Circuit Court
of Appeals. We do not havethe same procedural hurdles we had in our
earlier challenges. So this is avery promising way to get rid of this

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rule, which I don't think yourreers will even believe. Our listeners will
even believe this. But the SEChas been doing this for fifty years.
Yeah, I couldn't believe it whenI read in your note that this rule
has been around since nineteen seventy two. But just to frame this in a
kind of plain English scenario for listeners, so let's imagine that the SEC comes

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at me with some civil charges andthat they're not they're not a kind of
thing that's going to destroy my life. I think I'm convinced that the SEC
is absolutely wrong, but the impactto me of settling is not that bad,

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and I feel like I'm not ina position to spend two hundred thousand
dollars on lawyers to defend me.So I agree to settle with the SEC.
Even though I know or at leastdeeply believe that they are wrong.
But I settled because and this happensall the time in court. People come

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to settlements because they don't want topay lawyers anymore. Absolutely, and so
in this scenario, under the SECrule, I would be gagged, so
that for the rest of my lifeI could not say in public I settled
with the SEC, but the chargeswere wrong. Unfortunately, that's true,

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and they can either reopen their caseattempts to you, or if it was
a court case, whether or notthe SEC decides to do so, the
court can charge you with contempt forviolating the order. So this is one
of those things that, as asometimes student of the Constitution and very much

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a constitutionalist, makes my head explode. Hey, this gag rule is so
obviously unconstitutional. How could it possiblyhow could it have lasted fifty hours,
much less fifty years. Ahah.Well, the first trick deployed by the

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SEC was in nineteen seventy two.They just slipped it into the Federal Register,
which is very fine printch daily publicationof the federal government, and they
said, well, this is justa housekeeping rule, and so we don't
have to do notice in comment andit's effective immediately. So it was deceitfully

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put into the federal register under thefalse representation that it wouldn't find anyone outside
of the agency. And since itgags anyone who's settled with the agency,
that is obviously false. And ifa company, if an American company pulled
a stunt like that, the SACwould charge them with fraud. Wow.

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But okay, So that answers partof the question that maybe people didn't figure
out to begin with because they snuckit in. But it doesn't fully answer
the question as to how it's lastedover fifty years. Why weren't there previous
challenges, Why wasn't there a challenge, Why wasn't there a prime of facial
First Amendment challenge to this the firsttime it was imposed on somebody? Well,

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I think it tells you a lotabout how administrative power grows. I
think that a lot of people whoare represented by lawyers say, oh,
you got to sign it. It'sa rule. Okay, you don't look
into whether it's a constitutional rule.It's a rule. And everybody is so
anxious to settle in those situations.They don't want to mess up what is

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already a painful and constantly process byobjecting to something that's in the fine print.
And unfortunately it's through that kind ofacquiescence in government power. And I
think the bar on the attorney's representingpeople who settle are carry some blame too

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for not saying, you know,I'm not going to tell my client find
that that's unconstitutional. And I willalso say that in this case, we
have nine individuals, but we're alsorepresenting the press one a small local newspaper
called the Cape Gazette, and thereis a Reason magazine who want to report

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on people who settled with the SEC. And so we're representing a lot of
people who have been gagged with someone of us been gagged for well over
twenty years. And also the gaghas in three of the cases people tried

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to think push the gag out oftheir settlement. They said to the SEC,
I'll settled with you, but I'mnot going to go rea to a
gag And the SEC said, nogag, no settlement. Wow. So
it is a required condition that isunconstitutional. It's really insane and it's really
infuriating. I'm glad Reason is onthis reason is the Premier libertarian publication in

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the world, and I love reasonso and again just so for listeners,
imagine imagine this. Imagine somebody ischarged with a violation of an SEC rule
by the SEC and imagine either thatthe person didn't do the thing or that
the rule itself is insane. AndI think Peggy has actually taken on a

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couple of those cases too. Butyou go ahead and settle because you want
to get on with your life andyou don't want to pay the attorneys,
or for whatever other reason. Idon't care. Gosh heck, maybe even
you did it and you settle becauseyou did it, but you think the
rule itself is wrong. And areporter learns that you settled, comes to
talk to you and says, I'dlove to tell your story. And all

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they want to do is write afactual story about here's the SEC rule and
here's the person was charged with it, and here was their penalty, and
not even offering any opinion about therule, straight up news coverage. That
person who had to settle is notallowed to tell the story of the reporter
about an active government. I'm justoh, I want to scream, or

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I want a drink or or somethingwell, it's as she gets worse because,
oh my gosh, regulates believe itor not, it regulates the viewpoint
you express. You actually can sayif you settled, you know, good
for the SEC. I'm a badguy and they caught me. You say

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that you just can't criticize the government, Oh my gosh. Now, as
one of the scholars that has writtenin supportive of our challenges said, criticizing
the government is not only core FirstAmendment speech, it is the core of
the core a First Amendment speech.The First Amendment is all about the ability

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to criticize the government. Indeed,and I say it all the time.
I mean it's a little bit trite, I suppose at some point, and
I'm sure it's taught in every conlaw class there is, and that is
that you don't need a law toprotect speech that everybody likes, right,
You only need laws to protect speechesthat people don't like. And that's the

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whole purpose of the United States offreaking America. The purpose of this country
is the exact opposite of what theSEC is doing. In any case,
Peggy, before I have an aneurism, I'm gonna let you go. Peggy,
Peggy, little is a senior litigatorwith the New Civil Liberties Alliance NCLA

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Legal dot or you can read aboutthis case Peggy Will. We will definitely
keep in touch as this as thismakes its way through. Has there been
oral argument already at the Ninth Circuit. No, we just filed our opening
brief. Okay, SEC gets torespond. But we were pleased that the
court put this on a pretty fastschedule for an appellate court. So we're

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hoping that there will be oral argumentin the fall. Fantastic, I hope.
So we'll keep in touch. Thanks, Peggy, Okay, thank you,