The Cato Institute v. United States Securities and Exchange Commission, No. 1:19-cv-0047 (ABJ).  Complaint filed January 9, 2019.

The Cato Institute (CATO) wants to publish a manuscript detailing the Securities and Exchange Commission’s (SEC) litigation tactics.  The manuscript’s author entered into a settlement agreement prohibiting discussion of the case against the author in perpetuity. CATO asserts injury to its First Amendment interests.  

The SEC’s inclusion of post-settlement non-disclosure provisions in its settlement agreements is grounded in a regulation designed to inhibit agreement to claims solely for purposes of settlement.  Although the stated purpose of the regulation is to discourage admissions of wrongdoing where the party charged does not believe them to be true, this measure has been interpreted to allow the government to require that the party accused not discuss the case subsequent to settlement.

CATO was not a party to the author’s settlement with the SEC and the author is not a party to CATO’s suit.  CATO alleges injury in fact because the settlement agreement acts as an unconstitutional restraint of CATO’s speech and press freedoms.  The settlement agreement provisions are unconstitutional conditions requiring a party to forfeit a constitutionally guaranteed right in order to obtain settlement.  No government purpose is advanced by unending and overbroad speech restrictions, CATO submits.

CATO’s suit comes at a time when non-disclosure arrangements appear to be honored more in the breach than in the observance.  While there are many forms of such agreements, and much may depend on whether agreements are between private parties or with government entities, this challenge to the alleged heavy hand of federal regulatory power may prove interesting provided, however, that CATO, a stranger to the agreement with the SEC, is successful in establishing Article III standing.

Cato v. SEC Complaint D. D.C. Jan. 9, 2019


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