Supreme Court curtails SEC administrative law court powers

The U.S. Supreme Court today ruled that a hedge fund manager accused of securities fraud is entitled to a jury trial because the Securities and Exchange Commission was seeking civil penalties against him. CEI legal and policy experts praised the ruling in SEC v. Jarkesy curtailing some unchecked powers wielded by regulatory agencies and their in-house administrative law courts (ALCs).

Devin Watkins, CEI attorney:

“The Supreme Court delivered a great victory protecting the right to a jury trial when the defendant faces ruinous fines from a government agency. One of the outrages that sparked the American Revolution was the assignment of monetary penalties to forums without a jury. Jarkesy will ensure that twelve everyday Americans, not government bureaucrats, will decide whether a defendant’s property should be taken.”

Dan Greenberg, CEI general counsel:

“The Jarkesy opinion marks the Court’s most significant advance in civil liberties in decades. The Court insisted that common-law, common-sense principles must be respected: in this case, the Court breathed new life into the idea that prosecutions for legal wrongs require the right to a trial by jury, by vindicating that right in the context of administrative agency prosecutions. Jarkesy is a welcome development that both advances basic constitutional rights and rolls back the overreach of the administrative state.”

John Berlau, CEI director of finance policy and author of the book George Washington, Entrepreneur (St. Martin’s Press, 2020):

“The Supreme Court today rightly invalidated the SEC’s ruling against George Jarkesy because he was not given the opportunity of being tried by a jury of his peers. The Court today recognized that the SEC’s forcing those it accuses of common-law crimes to bypass a jury trial in favor of the SEC’s in-house administrative court is a violation of the Seventh Amendment’s fundamental right to trial by jury.

“One of the main grievances of the Founding Fathers that led to the Revolutionary War was the growing use by Great Britain of sketchy, juryless venues like admiralty courts to prosecute colonists for offenses such as smuggling. Listed prominently among the causes of discontent in the Declaration of Independence is Britain’s ‘depriving us in many cases of the benefits of Trial by Jury.’ Thankfully, the Court reaffirmed that this fundamental right must be respected and cannot be trampled.”

Stone Washington, CEI research fellow and co-author of a report on ALCs:

“Today’s Supreme Court ruling was a long-awaited, monumental check against the excessive powers of administrative tribunals. The Jarkesy case represents a critical step toward restoring public accountability over the federal government’s submerged system of adjudication.

“In a 6-3 ruling, Justices restored the sacred right to a trial by jury in the SEC’s administrative law court. While the Court refused to address the executive removal and non-delegation issues, restoring the jury trial right is a triumphal outcome.

“This decision carries significant implications. The Seventh Amendment’s protections do not simply dissolve whenever someone adjudicates matters within an administrative tribunal. American citizens always retain the right to have their civil cases heard before a jury, whether before an Article III court or within the bounds of an Article II agency court, whenever private rights are at stake.

“The Jarkesy case will help litigants seek relief from unfair administrative proceedings in other federal agencies. Other federal agencies impose some burdensome form of civil monetary penalty through their administrative law courts, and people subject to proceedings before those courts also deserve the right to a jury trial, just like George Jarkesy who faced securities fraud charges before the SEC.”

Ryan Young, CEI senior economist and co-author of a report on ALCs:

“Americans have the right to a jury trial. Today’s Jarkesy decision helps to restore a right that the SEC and other agencies took away.

“The narrow decision does not touch the Jarkesy case’s other constitutional issues, so there is more to be done. Today’s decision is still good news for every American’s civil liberties.

“The point remains that regulatory agencies should not have their own in-house courts where they appoint the judges and pay their salaries, set the rules for procedure and evidence, and where the government wins 90 percent of the time.

“We have a separation of powers so that there is never too much power in one place. Today’s decision helps to counter a long-running bipartisan trend of concentrating too much power in the executive.”

Related analysis:

Study: Conflict of Justice: Making the case for administrative law court reform

Law & Liberty article “A Declaration of Independence from the Administrative State”