The Supreme Court’s Starbucks Decision and Its Impact on SEC Enforcement Actions: A Changing Landscape in the 11th Circuit and Beyond

Dmitriy Smirnov

February 12, 2025

Firm News

In a landmark ruling, the Supreme Court in Starbucks Corp. v. McKinney, 144 S. Ct. 1570 (2024) rejected the historically lenient standard used by some federal agencies when seeking preliminary injunctions, instead reaffirming that courts must apply the traditional four-factor test. While Starbucks, a case that involved the National Labor Relations Board, was an important decision in reaffirming equitable principles, its real significance lay in setting the stage for broader application. The Third Circuit’s decision in SEC v. Chappell, 107 F.4th 114 (3d Cir. 2024) expanded its application to SEC injunctions, fundamentally altering the legal standard for regulatory enforcement cases. For anyone facing an SEC enforcement action, Chappell directly restricts the SEC’s ability to obtain injunctions without meeting the traditional four-factor test. And while Chappell is a Third Circuit case, the SEC is already applying it in other jurisdictions. 

Old vs. New Standard: A Fundamental Shift in SEC Litigation

For years, courts in many circuits, including the 11th Circuit, followed a more lenient standard for SEC enforcement actions. See SEC v. Unique Financial Concepts, Inc., 196 F.3d 1195, 1199 n.2 (11th Cir. 1999). This standard, also adopted by the Second Circuit in SEC v. Cavanagh, 155 F.3d 129 (2d Cir. 1998), required the SEC to establish only:

• A prima facie case of previous violations of securities laws; and
• A reasonable likelihood that the wrongdoing would be repeated.

Under this approach, courts did not require the SEC to demonstrate irreparable harm, balance of equities, or that an injunction was in the public interest—hallmarks of traditional equity jurisprudence required of mere mortals seeking injunctive relief.

Starbucks Corp. v. McKinney overturned this agency-friendly approach reaffirming that federal agencies must meet the traditional four-factor test for preliminary injunctions, as set forth in Winter v. NRDC, 555 U.S. 7 (2008):

• Likelihood of success on the merits;
• Irreparable harm in the absence of relief; 
• Balance of equities favors the movant; and
• Public interest supports the injunction.

The Third Circuit in Chappell was the first appellate court to apply Starbucks to an SEC enforcement case, rejecting the longstanding Unique Financial Concepts/Cavanagh framework and requiring the SEC to satisfy the full four-factor test to obtain injunctive relief. This is a meaningful shift for anyone facing an enforcement action by the SEC or the Commodities Futures Trading Commission (“CFTC”).

How Starbucks and Chappell Will Impact the 11th Circuit and Other Circuits

The ripple effects of these decisions are expected to be significant. The 11th Circuit Court of Appeals previously followed Unique Financial Concepts, allowing the SEC to obtain injunctions with only minimal showings of past violations and likely recurrence. Now, courts in the 11th Circuit may have to abandon this approach and require the SEC to meet the full four-factor test.

Similarly, the 2nd Circuit—long a proponent of the lenient standard in Cavanagh—may be forced to reexamine its precedent in light of Chappell and Starbucks. The D.C. Circuit, which frequently hears cases involving regulatory agencies, may also follow suit, especially given the Supreme Court’s broader trend of reducing agency power.

A New Era of SEC Defense: How Starbucks and Chappell Benefit Defendants

These decisions dramatically increase the difficulty for the SEC to obtain TROs and preliminary injunctions against businesses and individuals accused of securities violations. In practical terms, this means:

The SEC must now prove actual irreparable harm rather than simply alleging a risk of future violations. Courts will no longer defer to the SEC’s enforcement priorities when determining whether an injunction is in the public interest. Defense counsel has stronger grounds to oppose SEC injunctions, making it more challenging for the government to freeze assets or impose conduct restrictions early in litigation.

For businesses and individuals facing SEC enforcement actions, retaining competent SEC defense counsel—such as Fridman Fels & Soto, PLLC—is now more critical than ever. Our firm has the experience and strategic insight to leverage these legal developments to successfully oppose and prevail against SEC TROs, preliminary injunctions, asset freezes, and enforcement actions.

Loper and Jarkesy: Broader Weakening of Federal Agency Power

The Supreme Court’s hostility toward broad federal agency power extends beyond Starbucks. In Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), the Court overturned Chevron deference,¹ eliminating the rule that courts must defer to agency interpretations of ambiguous statutes. This decision significantly weakens regulatory agencies like the SEC by ensuring courts—not agencies—interpret securities laws. Similarly, in Jarkesy v. SEC, 144 S. Ct. 2117 (June 27, 2024), the Supreme Court struck down the SEC’s use of in-house administrative courts, ruling that they violate the Seventh Amendment’s right to a jury trial, further eroding the SEC’s enforcement powers.

Starbucks, Chappell, Loper, and Jarkesy collectively represent a paradigm shift away from deference to federal agencies. The result? A tougher road for the SEC to obtain injunctions and a stronger position for defendants.

This is a major moment for SEC defense litigation. Agencies can no longer count on automatic deference. The days of easy preliminary injunctions are over, and the legal playing field is leveling. Fridman Fels & Soto, PLLC is prepared to fight and win against SEC overreach under this new legal framework.

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If you receive a Wells notice, an SEC subpoena for documents or testimony, a FINRA 8210 request, a FINRA on-the-record (OTR) interview request, or a similar inquiry from a state regulator, such as Florida’s Office of Financial Regulation (OFR), it is essential to act immediately. Contact  Fridman Fels & Soto, PLLC to speak with an experienced SEC defense attorney. Prompt action is critical to protect your rights and ensure an effective response.

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 ¹Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

Alejandro Soto is a former senior official with the SEC. He leads Fridman Fels & Soto, PLLC’s Securities Litigation and SEC Defense Practice Group and is admitted in Miami, FL and Washington, DC.