A Supreme Court Triumph for Trial by Jury

A 6-3 majority in SEC v. Jarkesy strikes a blow for liberty against the administrative state by ruling that federal agencies can’t deny defendants their day in federal court

WSJ editorial. 

"The Supreme Court on Thursday ducked a decision on Idaho’s abortion law, which as usual is getting all the press. But the day’s more important story for American liberty is the 6-3 majority’s landmark decision (SEC v. Jarkesy) limiting the power of administrative agencies to charge fraud cases in their own tribunals. 

Hedge-fund founder George Jarkesy argued that a provision in the 2010 Dodd-Frank Act letting the Securities and Exchange Commission seek penalties administratively for securities fraud violated the Seventh Amendment’s right to trial by jury. The six conservative Justices agreed based on the Seventh Amendment’s text and history.

The Seventh Amendment says that in “[s]uits at common law . . . the right of trial by jury shall be preserved.” Chief Justice John Roberts notes in his majority opinion that securities fraud resembles a traditional common law claim by an injured party against a defendant for damages. “Both target the same basic conduct: misrepresenting or concealing material facts,” the Chief explains.

Another similarity: the SEC’s monetary penalties for wrongdoing. “While monetary relief can be legal or equitable, money damages are the prototypical common law remedy,” the Chief notes. “What determines whether a monetary remedy is legal is if it is designed to punish or deter the wrongdoer, or, on the other hand, solely to ‘restore the status quo.’”

The Court’s decision means most complaints by agencies seeking penalties will have to be charged in federal courts, where defendants enjoy more procedural rights including to legal discovery. Agencies also won’t benefit from a home-court advantage. They win nearly every case in their own tribunals, as you might expect.

The Chief notes that the Court has provided limited exceptions to the right to a trial by jury in a “class of cases concerning ‘public rights,’” such as public benefits (e.g. disability payments), immigration law, and collection of revenue. But as the Chief acknowledges, “the Court’s opinions governing this exception have not always spoken in precise terms.”

Alas, the Court didn’t clear up all of its precedential fog in Jarkesy. But the Chief stressed that “even with respect to matters that arguably fall within the scope of the ‘public rights’ doctrine, the presumption is in favor of Article III courts.”

The three liberals argue the opposite. They assert that the Constitution imposes no limits on the government’s power to seek civil penalties outside Article III courts. Their dissent accuses the conservatives of mounting “a power grab” by prescribing “artificial constraints on what modern-day adaptable governance must look like.” In other words, the Constitution must adapt to modern progressive political priorities.

As the Chief rejoins, “the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch. That is the very opposite of the separation of powers that the Constitution demands.” This would also deprive Americans of due process that the separation of powers is designed to safeguard.

Justice Neil Gorsuch is unforgiving about the dissent in his biting concurrence, joined by Justice Clarence Thomas. He calls it “astonishing” and says the dissent’s underlying complaint is with the “Constitution’s revolutionary promise of popular oversight of government officials—and with those judges who would honor that promise.”

He calls the dissent “all the more puzzling considering how regularly they have argued against that sort of sweeping concentration of governmental power.” And he quotes them chapter and persuasive verse. Perhaps the puzzle is solved if you understand that defending the modern administrative state has become a core progressive cause.

“People like Mr. Jarkesy may be unpopular. Perhaps even rightly so: The acts he allegedly committed may warrant serious sanctions,” Justice Gorsuch adds. “But that should not obscure what is at stake in his case or others like it. While incursions on old rights may begin in cases against the unpopular, they rarely end there.” Liberals used to believe that too."