Dichter-Mad Family Partners v. United States

Summarized by:

  • Court: 9th Circuit Court of Appeals Archives
  • Area(s) of Law: Sovereign Immunity
  • Date Filed: 01-28-2013
  • Case #: 11-55577
  • Judge(s)/Court Below: Per Curiam; Circuit Judges Reinhardt, Wardlaw and Paez
  • Full Text Opinion

“[D]ecisions of whether and how to conduct investigations and enforcement actions are firmly lodged in the Securities and Exchange Commission’s discretion,” and are exempted from judicial review under the "discretionary function exception" (28 U.S.C. § 2680(a)) to the Federal Tort Claims Act.

Plaintiffs invested in Bernard Madoff’s infamous Ponzi scheme. Plaintiffs brought a Federal Tort Claims Act (“FTCA”) action against defendants, the Securities and Exchange Commission (“SEC”). Plaintiffs’ complaint alleged the SEC was negligent in failing to carry out certain SEC duties, and sought to recover the investments they lost to Mr. Madoff as a result of the SEC’s alleged failures. The SEC motioned to dismiss the plaintiffs’ complaint, for lack of subject matter jurisdiction, under the “discretionary function exception” (“DFE”) (28 U.S.C. § 2680(a)) to the FTCA. The district court incorporated a 450-page SEC Inspector General’s report into the plaintiffs’ complaint, under the unique procedural circumstances of this case. The Ninth Circuit adopted Parts I through V of the district court’s extensive opinion. The Court adopted the district courts holding that, “decisions of whether and how to conduct investigations and enforcement actions are firmly lodged in the SEC’s discretion,” and are exempted from judicial review under the FTCA per the DFE. The Court endorsed the finding that the SEC had met its initial burden of proof under Gaubert, by showing the statutes, regulations and policies at issue were discretionary in nature. The Court adopted the district court’s comprehensive analysis which found the plaintiffs had failed to show any “mandatory rules” which proscribed the SEC’s “course of action,” or show that the SEC’s course of action “was not ‘of the kind’ that is ‘susceptible to policy analysis.’” The district court cited illustrative case law, secondary authority, and discussed the relevant legislative history and underlying policies of the DFE to dismiss the plaintiffs’ “broad” claim. Further, the Court held the district court neither erred in dismissing plaintiff’s amended complaint, nor in denying plaintiff’s request for additional discovery. AFFIRMED.

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