In a win for the Delaware Department of Justice’s Investor Protection Unit, the Delaware Supreme Court has affirmed the Superior Court’s dismissal in Swan Energy, Inc., Brandon Davis, John Schiffner, and Cody Davis v. Investor Protection Unit of the Delaware Department of Justice.
The Investor Protection Unit (“Unit”) of the Delaware Department of Justice initiated an administrative enforcement action in 2020 against Swan Energy, Inc. and four individuals. The Unit alleged that the respondents operated a long‑running scheme to induce investors—including those in Delaware—to purchase risky, unregistered oil, gas, and mining securities. Several years into the administrative proceeding, the plaintiffs filed a separate court action seeking a declaration that the Unit’s administrative proceeding violated their constitutional rights to a jury trial and due process. The Superior Court dismissed their lawsuit, and the Delaware Supreme Court has now affirmed that dismissal, concluding that the Delaware Securities Act’s administrative enforcement framework is constitutional and does not violate jury‑trial or due‑process rights.
In its opinion, the Supreme Court held that enforcement actions initiated by the Investor Protection Unit of the Delaware Department of Justice may proceed administratively and would not require a jury trial. The Court also rejected the plaintiffs’ due‑process claim, finding it unripe as‑applied and insufficiently supported as a facial challenge, noting the absence of any statutory or regulatory defect applicable across all IPU proceedings.
“The Delaware Supreme Court’s decision reinforces the integrity and fairness of Delaware’s investor protection process,” said Attorney General Kathy Jennings. “The Investor Protection Unit’s mission is to safeguard the investing public from fraud and protect the integrity of our markets. The Supreme Court’s ruling affirms that our processes honor both the law and the constitutional rights of all parties involved.”
The judgment of the Superior Court is affirmed in full and the matter is expected to be remanded to DOJ’s Presiding Officer for further proceedings consistent with the Supreme Court’s opinion.