Cato Institute v. SEC

Amicus brief filed by the Reporters Committee for Freedom of the Press and 14 media organizations

Court: U.S. Court of Appeals for the District of Columbia Circuit

Date Filed: June 29, 2020

Background: Since 1972, the U.S. Securities and Exchange Commission has imposed a mandatory “no-deny” provision, or “gag order,” on all companies and individuals that reach settlements with the agency. The provision allows the SEC to publicly comment on the agency’s allegations of misconduct, while preventing those who settle from publicly denying them, including when speaking with members of the press.

In 2019, the Cato Institute, a libertarian think tank and publisher based in Washington, D.C., filed a lawsuit challenging the SEC gag order, arguing that it violated the First Amendment. Cato’s lawsuit claimed that the gag order prevented it from publishing a book, articles and other commentary about the agency’s use of the gag orders.

The U.S. District Court for the District of Columbia dismissed Cato’s complaint for lack of standing, holding that the “chilling effect” on Cato is not enough to cause actual harm.

Cato appealed the decision to the U.S. Court of Appeals for the District of Columbia Circuit.

Our Position: The D.C. Circuit should vacate the district court’s decision.

• Cato has standing to challenge the SEC’s gag order policy.
• The news media’s access to sources who settle enforcement claims with the federal government is critical to their ability to report fairly and accurately on claims and settlements.
• The SEC’s gag order policy is contrary to the strong public policy in favor of government transparency.

Lisa Zycherman of Davis Wright Tremaine LLP represented the media coalition in this friend-of-the-court brief.

Quote: “These one-sided ‘gag orders’ on parties accused of SEC violations prevent members of the news media from accurately and fairly reporting on issues of significant public interest and importance. It is vital for citizens of a democracy to know how their government operates, particularly when it accuses fellow citizens of wrongdoing.”

Related: In May 2018, The Reporters Committee and a coalition of 19 media organizations filed a friend-of-the-court brief challenging gag orders imposed by Baltimore’s mayor and City Council, preventing those who settle police misconduct claims from discussing the allegations. The coalition argued that sources are essential to fair and accurate reporting on police brutality.

In November 2019, the Reporters Committee and a coalition of 21 media organizations filed a friend-of-the-court brief in support of Microsoft’s challenge to a gag order restricting the company from disclosing government requests for data on its customers. In the brief, the coalition argued that nondisclosure orders can obstruct newsgathering, chill reporter-source relationships and threaten the free flow of information to the public.