The Supreme Court Case stems from a Securities Law Enforcement Action the the Securities and Exchange Commission (SEC) brought in 2013 against Hedge-Fund Manager George Jarkesy, who’s also a Conservative TV and Radio Commentator. He Uunsuccessfully Sued to Block the Proceedings, and was later Fined for Defrauding Investors.
Eventually, Jarkesy Challenged the SEC’s Actions, and, in 2022, a New Orleans-based Appellate Court found that the SEC had Violated His Right to a Jury Trial. The Judges also Ruled that Congress wrongly allowed the SEC to determine what Cases go to its Courts versus the Federal Courts, and that the Judges overseeing the SEC’s Courts were too Insulated from Removal by the President.
The Supreme Court Ruled Thursday, that the (SEC) can’t rely on In-House Courts to Resolve certain Enforcement Disputes, a Decision that could deliver a Blow to a Critical Power of Corporate Watchdogs across the Federal Government.
In a 6-3 Decision along Ideological lines, the Jjustices backed a Challenge to the Constitutionality of the SEC’s Internal Tribunals, a resounding Win for Conservatives who have argued for years that Federal Regulators wield too much Authority with too little Oversight.
Chief Justice John Roberts, who penned the Majority Opinion, wrote that the SEC’s reliance on In-House Courts and Judges, Violates the Constitution’s Guarantee of a Jury Trial, when the Agency is seeking Civil Penalties for Fraud.
The Court did Not take up other Issues raised in the Case, whether Congress erred in Allowing the SEC to choose where to bring Cases, and if the Agency’s In-House Judges are too Insulated from Removal.
“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” Roberts wrote.
The Case decided Thursday, SEC Commission v. Jarkesy, hits at an Obscure though Important Issue that has been at the Forefront of those Attacks for more than a Decade.
Justice Sonia Sotomayor wrote a Dissenting Opinion, and read large portions of it from the Bench, which is typically a sign of more Profound Disagreement.
Sotomayor called the Majority’s Ruling “Earthshattering” and said claims by Her Conservative Colleagues, that the Decision is Limited to the SEC were “incredible” and “should fool no one.”
“The constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress,” Sotomayor warned in Her Opinion, joined by Justices Elena Kagan, and Ketanji Brown Jackson.
Sotomayor pointed to Worker Safety Programs run by the Occupational Safety and Health Administration (OHSA) as in particular Jeopardy.
“Litigants seeking further dismantling of the ‘administrative state’ have reason to rejoice in their win today, but those of us who cherish the rule of law have nothing to celebrate,” She declared in One line She recited in the Courtroom.
The SEC’s In-House Courts, historically used to Adjudicate a broad Slate of Securities Law Violations, have become the subject of a decadelong Attack by Legal Activists, the Business Lobby and Billionaires like Mark Cuban and Elon Musk. Critics say the Courts are riddled with Biased Judges and Constitutional Issues, Accusations the Agency has Rejected.
Supporters of the Administrative Law Judge system, say it routes Disputes to Adjudicators who typically have deep Expertise in the Subject Matter. Backers also note that anyone Dissatisfied with the Outcome, can seek Review at the end of that Process from traditional Federal Courts.
The Supreme Court has previously found Issues with the Structure of the SEC’s Internal Tribunals and how Judges overseeing the Courts are Appointed, prompting the Agency to sharply scale them Back, and to Funnel nearly All Contentious Cases through the Federal Judiciary instead of its Own Courts.
In advance of the High Court’s Decision, Consumer and Labor Groups warned that a Broad Ruling by the Justices could rope in the In-House Courts of other Agencies like the: Federal Trade Commission and the National Labor Relations Board.
Legal Challenges to the Administrative Law Judges at both Agencies are Pending with those involved closely watching this SEC Action. Sidelining the In-House Courts at those Agencies wouldn’t cripple them entirely, but Current and Former Officials said it would Complicate and Slow Enforcement efforts.
The Justices, however, only opted to weigh-in on the Jury Trial issue in their Opinion, as many expected following Oral Arguments in November, 2023. During that Session, Attorneys representing the SEC Argued that the Right to a Jury Trial doesn’t Apply to the types of Cases usually brought in the Agency’s Courts, which have Historically dealt with Financial Malfeasance of Fraud.
But the Conservative Justices appeared skeptical of the claim. “It’s curious that — unlike most constitutional rights — you have that right until the government decides that you shouldn’t,” Roberts said at the Time.
NYC Wins When Everyone Can Vote! Michael H. Drucker
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