Abstract
The Supreme Court held that a statute authorizing the Securities and Exchange Commission to levy civil penalties through administrative proceedings for securities fraud was unconstitutional, because it deprived the defendants of the right to a jury trial under the Seventh Amendment. The fact that civil penalties were the outcome sought was “all but decisive” of the case, but the added fact that the statutory securities fraud statute was substantially similar to common law fraud, which would require a right to a jury trial, confirmed the conclusion. Strictly construed the case only affects agency administratively imposed civil penalties for statutory fraud, but language in the case suggests a broader impact, which could substantially impact agency adjudication more generally.
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Notes
- 1.
U.S. Const., 7th Amendment.
- 2.
The Supreme Court has said that Congress may not delegate its legislative powers to executive agencies unless it provides an intelligible principle to guide the exercise of that delegation. See, e.g., Gundy v. United States, 588 U.S. 128 (2019).
- 3.
An SEC ALJ may only be removed for cause upon a complaint by the SEC, whose members arguably may only be removed for cause, and a determination of cause by the Merit Systems Protection Board, whose members may only be removed for cause. In Free Enterprise Fund v. Public Co. Accounting Oversight Board, 561 U.S. 477 (2010), the Supreme Court held that a dual for-cause removal protection for members of the Public Company Accounting Oversight Board unconstitutionally insulated them from Presidential oversight.
- 4.
Jarkesy v. Securities and Exchange Comm’n, 34 F.4th 446 (5th Cir. 2022).
- 5.
Securities and Exchange Comm’n v. Jarkesy, 144 S.Ct. 2117 (2024).
- 6.
At the time of the founding, as had long been the case in England, courts were either common law courts or courts of equity. Common law courts employed juries as fact-finders and courts of equity, derived from Chancery Courts in England, did not. Common law courts generally provided damages as a remedy for a winning plaintiff. Courts of equity, on the other hand, typically issued an order to the losing defendant to do or refrain from doing something, what we call an injunction. In the mid-twentieth century, federal law eliminated the two different courts, merging them into one court, which exercises both forms of judicial power.
- 7.
Ibid., at 2129.
- 8.
Ibid.
- 9.
Ibid., (quoting Tull v. United States, 481 U.S. 412, 422 (1987).
- 10.
Ibid., at 2130.
- 11.
Ibid.
- 12.
Ibid., at 2132 (quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 493 (1856).
- 13.
See Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1856).
- 14.
See United States v. Duell, 172 U.S. 576 (1899).
- 15.
See Oceanic Steam Navigation Co. v. Stranahan, 214 U.S. 320 (1909).
- 16.
See Ex parte Bakelite Corp., 279 US. 438 (1929).
- 17.
See Crowell v. Benson, 285 U.S. 22 (1932).
- 18.
See Atlas Roofing Co. v. Occupational Safety and Health Review Commission, 430 U.S. 442 (1977).
- 19.
Crowell v. Benson, supra, at 50.
- 20.
Note 18, supra.
- 21.
Unanimous among the eight justices involved in the decision. Justice Blackmun took no part in the case.
- 22.
Jarkesy, supra, at 2138 n. 4.
- 23.
See ibid.
- 24.
Ibid., at 2147 (Gorsuch, J., concurring).
- 25.
Ibid., at 2158–59 (quoting Crowell v. Benson, 285 U.S. 22, 50 (1932) (Sotomayor, J. , dissenting).
- 26.
Ibid., at 2159 (quoting Scalia, J., concurring in part and concurring in the judgment, in Granfinanciera, S. A. v. Nordberg, 492 U.S. 33, 68–69 (1989)).
- 27.
Atlas Roofing, supra note 15, at 444–445.
- 28.
Granfinanciera v. Nordberg, 492 U.S. 33, 52 (1989).
- 29.
Ibid.
- 30.
481 U.S. 412 (1987).
- 31.
Jarksey, supra note 5, at 2129.
- 32.
Ibid., at 2130.
- 33.
Ibid.
- 34.
Jarkesy, supra note 5, at 2134 (quoting Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 284 (1856)).
- 35.
This has been suggested in Christopher J. Walker and David T. Zaring, The Right to Remove in Agency Adjudication, 85 Ohio State L.J. 1 (2024).
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Funk, W. (2025). Securities and Exchange Commission v. Jarkesy: New Limits on Administrative Adjudication. In: Schweber, H. (eds) SCOTUS 2024. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-78551-1_7
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