SCOTUS Sets Oral Argument in SEC v. Jarkesy for Nov. 29

Oral argument in the U.S. Supreme Court's administrative law case SEC v. Jarkesy will be Nov. 29, according to an update to the court’s calendar Thursday. The case has implications for the enforcement power of federal agencies that use administrative law judges, such as the FCC (see 2211030063). The proceeding stems from a 2013 SEC enforcement action against George Jarkesy and investment firm Patriot28 over securities violations by their hedge funds. The SEC ruled against Jarkesy, but in 2022 the 5th U.S. Circuit Court of Appeals said it was unconstitutional for Congress to give the SEC discretion over whether enforcement matters are adjudicated in front of its ALJ, imposing civil penalties in agency hearings with no jury violated the 7th Amendment, and ALJs are unconstitutionally difficult for the president to remove. In a brief Wednesday, Jarkesy argued the SEC violated the constitutional right to a jury trial by adjudicating fraud cases in its in-house courts. The SEC argued precedent allows those cases to be tried without juries outside the federal courts because its fraud enforcement involves the government suing violators on behalf of the public. This view of public rights doctrine ignores historical precedent stretching back to English common law, said Jarkesy Wednesday. Since SEC fraud cases like Jarkesy’s target deals reached between two private entities, without the government as a party, they involve private rather than public rights, and require a jury, said the brief. By delegating authority to the SEC to decide if fraud cases would be tried in-house in front of an ALJ or in the federal courts, Congress violated the Constitution, the brief said. Agency ALJs also violate the Constitution because their tenure protections mean they can’t be directly removed by the president, the brief said. Jarkesy also argued SCOTUS can’t separate the ALJ protections issue from the rest of the case, or remand the matter to the SEC. “The Court cannot fix the violation by severing the offending for-cause protection, because that protection was a material element of Congress’ statutory scheme,” said the brief. “The reviewing court’s decision is the final word.”