Tuesday, December 5, 2023

Oral Argument - Jarkesy v. Securities and Exchange Commission

Oral Argument - Jarkesy v. Securities and Exchange Commission 


'Justices divided over jury trial right in SEC enforcement actions  By Ronald Mann SCOTUSBLOG

 Wednesday’s argument in Securities and Exchange Commission v. Jarkesy was oddly distant from the decision of the lower court and the briefs and arguments of the parties. The decision of the U.S. Court of Appeals for the 5th Circuit – vigorously defended by George Jarkesy, the target of long-running SEC proceedings – accepted three separate constitutional challenges to the SEC’s apparatus. Specifically, it held that the Seventh Amendment right to a jury trial does not tolerate the imposition of civil penalties in an SEC administrative proceeding; that Congress cannot properly delegate to the SEC the decision whether it should use administrative action, rather than a civil action in a court, to redress alleged misconduct; and that the statutory procedures for appointment of the SEC’s administrative law judges violate the Constitution’s appointments clause. The justices said not a word about the second challenge, and they made only one offhand comment about the third challenge, when Justice Brett Kavanaugh suggested in passing that the administrative law judges’s appointments won’t pass muster with him.

The rest of an unusually long argument (more than two hours) was devoted to the first question. On that point, the justices are deeply divided. To give some context for the dispute, the Supreme Court has decided several cases over the last half century considering the extent to which Congress can call for adjudication of disputes before administrative agencies, where a jury is not available. One of the earliest of those cases, Atlas Roofing Co. v. Occupational Health and Safety Review Commission, validated the proceedings under which OSHA imposes penalties for workplace hazards in administrative proceedings. Several later cases, though, all involving disputes between private parties, have rejected various aspects of statutory schemes, most prominently the Bankruptcy Code, that shifted adjudication of disputes away from traditional civil courts (with juries).

As expected, some of the justices were wholly unsympathetic to the SEC. Justice Clarence Thomas, for example, has staked out a position in prior cases that the “public rights” doctrine – the idea that agencies can adjudicate “public” rights without a jury – cannot apply to any matter depriving an individual of property, so it would be surprising if he accepted the government’s argument here.

The other justice clearly dissatisfied with the non-jury administrative proceeding was Neil Gorsuch. He repeatedly ridiculed the argument of Principal Deputy Solicitor General Brian Fletcher, representing the SEC, that the jury trial right is wholly inapplicable to agency proceedings whenever the public rights doctrine permits Congress to authorize agency adjudication. For Gorsuch, that amounted to the view that “the Seventh Amendment would, on your account, dissipate, disappear, whatever verb you want to use.” For him, accepting that result would allow Congress to “overrule the preexisting Seventh Amendment right” simply by transferring an action to an agency.

By the end of the argument, Gorsuch had staked out his position with no ambiguity: because the elements of the administrative proceeding are similar to the elements of common-law fraud – “those elements all match up” – Congress can’t move the dispute to an agency (without a jury): “Congress is free to proscribe [fraud] and extend [the common-law action] any way it wants. It just can’t take away a person’s right to be heard before his peers.”

Having said that, another group of justices found the case just as easy on the other side. The leader here was Justice Elena Kagan. For her, Atlas Roofing made this an easy case. “Atlas Roofing says numerous times, it could not have been clearer, the Seventh Amendment is no bar to the creation of new rights or to their enforcement outside the regular courts of law.

When S. Michael McColloch, the lawyer for Jarkesy, rejected that understanding, she explained: “Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevent it from committing some new types of litigation to administrative agencies with special confidence. …. [T]hat’s the issue. That’s the result. The Seventh Amendment is no bar.”

McColloch, understandably enough, did not concede to Kagan that he should lose. The result, though, was that Kagan repeatedly and with increasing acerbity cut him off to reiterate her position. So, a few minutes later she characterized McColloch’s reliance on the Court’s more recent cases as misguided because “[w]e’ve actually never had since Atlas Roofing another … public/private case, where there’s a government entity on one side of the V, and the reason that we’ve not had those in 50 or 60 years is because those have been thought the easy cases. …. Nobody has had the … chutzpah, to quote my people, to bring it up since Atlas Roofing.”

No comments:

Post a Comment