The Volokh Conspiracy
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SEC v. Jarkesy: A Win for the Separation of Powers and the Right to Civil Jury Trial
The Supreme Court held today that the Seventh Amendment right to a civil jury trial in fraud cases was violated when an administrative law judge of the S.E.C. decided the case.
Chief Justice Robert wrote an excellent, thorough, and overwhelmingly persuasive majority opinion in S.E.C. v. Jarkesy, 603 U.S. __ (2024), holding that the Securities and Exchange Commission could not try civil fraud suits before its own Administrative Law Judges. It must instead try them in federal District Court where the Seventh Amendment right to a civil jury trial must be available in all cases which were "[suits] at common law," as opposed to suits in equity and in admiralty.
The Supreme Court did today for the Seventh Amendment roughly what it did for the Second Amendment in District of Columbia v. Heller, 554 U.S. 570 (2008). It held, in a narrow opinion, that Congress and the President cannot completely ignore the Seventh Amendment, just as they used to completely ignore the Second Amendment before Heller was decided. This is the case at least in civil fraud cases brought by the S.E.C.
The Chief Justice's opinion was joined by five other justices: Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett. Chief Justice Roberts' opinion examined originalist, textualist, and doctrinal sources of law. In much of the opinion, Chief Justice Roberts makes an overwhelmingly powerful argument that S.E.C. fraud cases are in the words of the Seventh Amendment "[s]uits at common law" which can only be tried by a jury and not suits in equity or admiralty where the right to jury trial has not historically been available.
The Chief's opinion is amply supported by prior Supreme Court precedent. The case does not overrule any precedent, although it distinguishes Atlas Roofing, Inc. v. Occupational Safety & Health Review Commission, 430 U.S. 442 (1977), a much critiqued precedent; Atlas Roofing's author (Justice White) claimed that it was overruled by a Supreme Court case in the 1980's, an issue which the Chief Justice's opinion pointedly did not address.
Justice Gorsuch wrote a very powerful and persuasive concurrence, which was joined by Justice Thomas, and which emphasized that the Jarkesy case implicated Article III's promise of a life tenured judge to hear suits in common law, as well as implicating the Seventh Amendment. Justice Gorsuch also observed that the Fifth Amendment's Due Process Clause was implicated as well, because the S.E.C. was arguing that it could violate the separation of powers by combining legislative, executive, and judicial power—all in one administrative agency.
Justice Sotomayor wrote a heated dissent, which was joined by Justices Kagan and Jackson. She complained that precedent was actually on her side, contrary to the Chief Justice's opinion. She relied very heavily on Atlas Roofing. Justice Sotomayor's view was that the Jarkesy case "involves the Government acting in its sovereign capacity to enforce a statutory violation. That makes the right at issue a 'public right' that Congress can take outside the purview of Article III, even when the new cause of action is analogous to a common-law claim." She also argued that "There are good reasons for Congress to set up a scheme like the SEC's. It may yield important benefits over jury trials in federal court, such as greater efficiency and expertise, transparency and reasoned decision-making, as well as uniformity, predictability, and greater political accountability."
Overall, S.E.C. v. Jarkesy is a correct and persuasive six justice majority opinion, which holds that in civil fraud suits, at least, the S.E.C. must bring its cases before an Article III judge and afford the defendant, who it is prosecuting, the right to a civil jury trial. It cannot prosecute such a suit before one of its own internal administrative law judges. Jarkesy is thus an important victory for both the rule of law and for common sense.
