HomeCrimeGorsuch challenges administrative law in Jarksey SCOTUS case

Gorsuch challenges administrative law in Jarksey SCOTUS case

Left: George Jarkesy (image via FOX Business/YouTube screengrab.) Right: Associate Justice of the Supreme Court Neil Gorsuch (Erin Schaff-Pool/Getty Images).

The Supreme Court of the United States heard over two hours of oral arguments Wednesday in a case that threatens a massive unraveling of federal administrative agencies. In SEC v. Jarkesy, a man who was found to have committed securities fraud found champions among conservative forces — most notably, Justice Neil Gorsuch — who have long been looking for a reason to curtail the power of executive branch agencies.

Jarkesy’s “little picture”

The ultra-conservative U.S. Court of Appeals for the 5th Circuit had ruled in favor right-wing talk show hostRepublican donor, and hedge fund promoter and accused securities fraudster George Jarkesy and against the federal Securities and Exchange Commission (SEC) on three separate issues.

Jarkesy, a hedge fund founder, was prosecuted for securities fraud by the SEC through its in-house enforcement proceedings in 2013. He was found liable and ordered to pay $1 million in fines and restitution. On appeal, Jarkesy raised three questions, all of which the Fifth Circuit decided in his favor.

  1. Is the SEC authorized by Congress to hold non-jury proceedings that impose monetary penalties?
  2. Is the SEC authorized by Congress to decide whether an enforcement case operates as an administrative proceeding versus in a federal district court?
  3. Congress passed the Administrative Procedure Act (APA) in 1946. It said that administrative law judges (including the SEC’s judges) can only be removed for good cause. Was Congress authorized under the Constitution to protect administrative judges so much?

Despite the ultra-complex legal analysis required by a case with three significant — and largely unrelated — legal questions, the justices confined the majority of their questioning Wednesday to the jury requirement issue.

Jarkesy’s “big picture”

The case has major implications for federal administrative agencies via the Seventh Amendment. Should the justices rule that the SEC was not authorized to hold non-jury proceedings in cases like Jarkesy’s, it would mean that in future cases, all such proceedings must be held in courts.

The Seventh Amendment guarantees the following:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

In the relatively recent past and over the fierce objection of conservatives, Congress has expanded the powers of administrative agencies generally and the SEC in particular such that agencies can seek penalties against individuals in administrative (non-court, non-jury) proceedings. When the Fifth Circuit ruled for Jarkesy, it said that the SEC’s system violated the Seventh Amendment, which guarantees the right to a jury trial.

Conservatives argue that if the justices uphold that aspect of the ruling, countless Americans would regain access to a foundational constitutional protection. Gorsuch spared no opportunity to proclaim the fundamental importance of the Seventh Amendment during Wednesday’s marathon arguments.

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