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Last week, the U.S. Court of Appeals for the Fifth Circuit issued an opinion that upheld the SEC’s use of a “gag order” in a civil consent decree. If this case – and the outcome – sound familiar, that’s because it is.

The decision – SEC vs. Novinger – follows a series of challenges by a defendant who sought to reopen a 2016 settlement with the SEC. He’s represented by the same organization that has petitioned the SEC to end this policy – and the latest opinion highlights that he was “disheartened but not dissuaded” by a similar ruling on his case two years ago, which John blogged about at the time. After bringing another motion at the district court level that raised the same claims as the one that was previously denied, the Court of Appeals once again had to weigh in.

In this instance, as in 2022, procedural defects prevented the court from examining the merits of the SEC’s “neither admit nor deny” policy. While the procedural mechanics are enough to make a corporate lawyer’s head spin, the bottom line was that the defendant didn’t bring the right type of motion (which would have been a “Rule 60(b) motion”), so the Appeals Court found that it did not have jurisdiction. And while you might think that leaves the door open to yet another challenge, the panel of judges seemed to shoot down that notion:

Novinger claims first that, after the Rule 60(b) motion failed in Novinger I, he had no other way to challenge the “gag order.” Specifically, he explains that he cannot bring a separate action nor violate the consent decree because of, respectively, the collateral-attack and collateral-bar rules. Assuming, arguendo, that Novinger is correct that no other avenues exist by which to obtain relief, that makes no difference. As the SEC points out, Novinger can, and did, seek relief under Rule 60(b). That he failed does not entitle him to some other form of relief.

So, despite the Fifth Circuit’s recent reputation as “The Place Where SEC Rules Go to Die,” the Enforcement Division’s policy lives to see another day, and if you are working on any settlements, it is something you will need to factor into your decisions. The policy continues to have plenty of critics, and the NCLA is relentless, so this is probably not the end of the story.

– Liz Dunshee