This is Bloomberg Law with June Brusso from Bloomberg Radio. The case before the Supreme Court is about a challenge to the powers of the SEC to bring legal actions in house, and it's another example of the conservative justices targeting the administrative state. During the oral arguments, Chief Justice John Roberts expressed concerns over the power of federal regulators.
The extent of impact of government agencies on daily life today is enormously more significant than it was fifty years ago.
The Jocracy case could strip the SEC of a key enforcement tool, and Conservative justices like Brett Cavanaugh suggested that people accused of fraud by the SEC have a constitutional right to have their cases decided by a jury in federal courts instead of by the SEC's in house administrative law judges.
That seems problematic to say the government can deprive you of your property, your money, substantial sums in a tribunal that is at least perceived as not being impartial.
A change in the law by the Court here could have effects far beyond the SEC, because roughly two dozen agencies, including the EPA, the CFTC, and the Federal Trade Commission, have similar enforcement schemes, as Liberal Justice Sonya Sotomayor pointed out to Jocasy's attorney Michael McCulloch.
All of those agencies we'll have to go to court. Correct, Well, you are, all of their proceedings are now nullified unto your theory.
And Liberal Justice Elena Kagan pointed to a nineteen seventy seven Supreme Court ruling at La Roofing, telling McCulloch it settled the issue and there was no right to a jury trial here.
In a case where Congress has given an agency the power to enforce something and the agency is bringing the charge, if you will that you know that that's just not it's that's settled.
Well, it's settled only to the extent no one's brought it up and forced this issue since Atlas Roofing in his.
Chorea is contact. Nobody has had the you know, kutzpa to quote my people to bring it up since Atlas Roofing.
My guest is Harold Krent, a professor at the Chicago Kent College of Law. How this involves George Jarcasy, a former hedge fund manager and conservative radio host, and the SEC found that he had committed securities fraud in twenty thirteen for misleading investors. Hell tell us about the case and what's at stake here.
This started ten years ago and the variety of challenges against the SEC proceedings, and finally, after first losing in the DC Circuit, he tried and found more success in the Fifth Circuit, and the Fifth Circuit decided on three distinct constitutional violations. First that there was a non delegation violation in the fact that Congress had not given sufficient guidance to the Security Change Commission about whether to bring a security fraud action before an alj as opposed to
in front of a court. And second, that the SEC proceedings weren't constitutionally constructed because the administer of law judges in the Security is a Change Commission are protected from that will removal and thus violate Article two. And the third problem was that the fraud charges that the SEC successfully brought against Charc echoed those of fraud cases at common law and that therefore that duct should have been
granted a jury trial. If the Supreme Court decides all three issues against the SEC, they would have enormous ramifications on the administrative state. That's not likely after listening to the oral argument, but nonetheless, the consequence of dramatic and briefly they are that almost every particular individual or firm performed agency, many at least, would have the right to a jury trial and not have to go before an administrative tribunalism is currently the case. That would be one
fundamental change. The second would be that all administrative law judges would have to be subject there outwill removal, which would undermine the independence, ironically of these administrative determinations. And third, there would be some kind reinvigoration of the non delegation doctrine, which was mimit Congress's ability to delegate issues for administry of agencies to resolve. So very consequential case, very usual what happened at oral arguments or the stakes couldn't be higher.
So, now, before we go into the oral arguments, explain the difference between an administrative law judge and a federal district court judge known as an Article three judge, and the difference in the proceedings in the different forums.
So the two different tracks of litigation when the government is involved. The first would be before an Article three judge in a federal trial court, and those proceedings are very similar to anything one would see on TV in terms of having rules of evidence. You'd have a judge who is protected from any kind of diminution and salary
or removal. You'd have attorneys for both sides arguing subject to delineated rules, and at times you'd have a jury trial as well if there were money damages at stake. In contrast, in a typical administrative proceeding, of which there are hundreds of thousands a year, you would have an Administry of Law judge who is appointed by the agency and is subject to remove by the agency, but at least currently only for some kind of misconduct. The proceeding
would go before this Administry of Law judge. The rules of evidence would be much more flexible, in other words, more information could be submitted. In addition, there would be no jury, and so the case would first go before the Ministry of Law judge, but then can be appealed to the administrative agency itself in this case the Securities and Exchange Commission, and of course those are political actors.
But then only after these Securities and Exchange Commission would make a decision, then judicial review would be opened up and a court would determine whether the agency reasonably acted in terms of deciding upon a fine or discouragement, as indeed both happened in this case. So they're very different tracks.
There's judicial involvement in both of them. One the judiciary has a review function over the agency and cancy agency some difference in how it conducts the proceedings, and the other it's much more protective of individual rights and the individual would have the ability to have a jury check upon any kind of zeal or overreaching by the government and bringing these charges.
Now.
Jocasy contends that defendants in SEC cases have a constitutional right to make their case to a federal jury, and the oral arguments focused almost entirely on that one issue on the Seventh Amendment, which provides that in suits at common law, the right of trial by jury shall be preserved. So tell us about the argument over the Seventh Amendment.
Well before the argument of the amendment. What I think is extraordinary about this case is the two other very significant constitutional arguments that we discussed were hardly mentioned it all during oral argument and or argumently in almost two hours. And so the question is why, And I don't know
the answer. You only speculate that either the justices were convinced that the other two arguments were not very weighty and therefore they knew what the result would be, or they might have decided that they were going to throw this case out on the Seventh Amendment grounds anyway, and so they didn't have to decide either the non delegation
argument or the alga removability issue. But it is extremely unusual for the Court to ignore two very important constitutional challenges in a case of this nature, So that to me is the biggest mystery of this case. But turning to the difficult question about the Seventh Amendment, the question is how broad the Seventh Amendment should be construed to extend.
On the one hand, an individual has a right to a jury trial, but the courts for one hundred and fifty years, if not more, have said that the very trial right does not exist if there is a public right involved, And so much of the argument discussed from
different perspectives what is a public right? And the Supreme Court held fifty years ago in a case called Atlas Roofings, that a public right would include not only issues between individuals and the government directly, such as taxes and claims like social security benefits, but also would include anything under a comprehensive congressional scheme that was devised in order to
protect the public. So in that case, Congress had created a mechanism to allow a federal agency OOSHA, to inspect workplaces and find individual companies for failure to maintain a healthy workplace. And then the court said, yes, these kinds of finds are a little bit like negligence claims or wantful death claims that could be launched against employers. But when the government brings such an action, it does so
for a different purpose. It brings the action to protect the public and to try to prevent these kind of workplace accidents. And therefore, in light of this unique public nature, there is no right to a jury trial, and that therefore the government can recover fines even outside of the jury context. So this is the precedent that the government relied upon, and it has been cited in lots of cases since involving finding immigration proceedings, in customs proceedings and
so forth. So the stakes are very high in this case, and indeed, much of the argument was talking about line drawing. What is to distinguish the fraud claim under the Securities Act in the Jerxi case from a case involving taxes, involving customs duties and so forth.
Coming up next, we'll talk about what the decision might look like. I'm June gram So when you're listening to Bloomberg, I've been talking to Professor Harold Krant to the Chicago Kent College of Law about Supreme Court oral arguments this week over a challenge to the power of the sec
to bring legal actions in house. The Conservative Justice is seem to be very concerned about the right to a jury in this case, and it struck me as a bit odd because jury trial isn't something they've historically cared about very much, right, They've always pushed forced arbitration they have.
I mean, certainly, it's true. And what is clear out of this discussion is that they have circled back to the importance in seventeen ninety one of the ratification of the Seventh Amendment to think that this is a hallmark right that should be preserved by any individual, not only if they're litigating against another company or another individual, but also when they're litigating against the government itself. And that's not how we've recognized that right in the last seventy
five years. So the Court is I think using this now is a lever to try to either cut down or diminish the power of these administrative agencies that operate in so many sectors of our lives, from transportation into immigration, to workplace safety, to environmental safety, and so much more. And so by focusing on the Seventh Amendment in a way that they haven't before, they will effectively force agencies to go to court to collect penalties, and that will slow down the administrative process.
Justice is Elena Kagan and Katanji Brown Jackson said that the at Liss ruling settled the issue here, So would the Court have to overrule that nineteen seventy seven precedent in order to rule for jocracy here.
Likely they would do so, at least in substance, if not inform I mean. Chief Justice Roberts himself said, well, you know that pathless was fifty years ago, and we've seen a lot of that's happened in the last fifty years, including the increasing power of administrative agencies. So it's time for us to take a good look back at it
to see if it makes sense today. And to be fair, some of the more conservative justices, particularly Justice Barrett, was struggling to figure out a limiting principle about how you could make the determination of when the Seventh Amendment right would be triggered. For instance, is it just because there's a civil penalty that would be at least one easily administrable remedy to say, as opposed to say a discooragement penalty or something else, or a cease and desist order.
So is that line important? So there was at least some kind of wrangling amongst some of the conservative justices, not Justice Alito, not Justice Thomas, but the others about this kind of line drawing. Is if they extend the Seventh Amend, how far will the extension be? And at least they were concerned that a literal interpretation of what Darshi was arguing might extend very far.
Indeed, the Assistants Elicitor General said the government was protecting the rights of the public generally, and when the public's rights are at issue, the right to a jury trial guaranteed by the Seventh Amendment in suits that common law did not apply. Do you agree or disagree that the Seventh Amendment applies to this situation.
I think that the President is extremely strong that the Seventh Amendment does not apply when Congress allows individuals to sue each other before a federal form. That's where the interest and concern of the Seventh Amendment should be at its strongest. And those are the examples I think the Court should be focusing on. But I don't think the Court is correct to be concerned about is when the actual challenges not between two private entities, but the between
a private entity and the federal government itself. That's really the essence of what a public right is. That's what Justice Scotias said years ago, and that should be the focus here. And so in this case, when we have the government saying that we're not suing on behalf of a private party. We're suing because you have rattled confidence in the securities markets, that's absolutely permissible, and the jury trial right and the serf of Amendment should not be triggered.
How do you think they're going to rule? Is it going to be a six ' to three ruling, whatever it is.
You know, again, it's so difficult to judge from in our a argument. How of course finally going to come out but I would guess that they will try to articulate a fuzzy line, but a line that is more restrictive of Congress's ability really to determine what kind of
suits can be presented before administrative agencies. I doubt they will go as far as to say that Congress can't allow such suits to go before, but they'll probably talk about Congress is limited when the suit is either in all respects similar or echoes or derivative of a common
law right. So what the court we'll want to do is say, use the touchstone of a common law right and say, if you have the right to have a jury trial in a similar case in seventeen ninety one and a court to Westminster, then Congress cannot effectively deprive you of that right by calling it something else, by changing it slightly and vesting it before an administrative agency. That'd be my educated guess.
Let's talk about the ramifications of a decision against the SEC. Here. For example, will the decision affect the Federal Trade Commission, which uses in house judges as well.
The decision is likely to affect Federal Trade Commission. It may affect OSHA, It may affect the customs duties ends on the exact test for how to determine whether this particular right of action brought by the government is similar to the suited common law in seventeen ninety one. I mean, that is a very archaic way of understanding what Congress can do and can't do in terms of deciding where these particular claims can be brought. But I think that's
where the court is headed. And that was the concern that was recognized by counsel for Darsi that depending upon the line drawing, the case may either have a modest impact or a tremendous impact. And so even if the court, as it seems, will lean towards DARKSI, the real question is how broad the decision and that's something they wrestled at it. And indeed, just as Sodhamoyor said, look, this is a big issue. Neither side has litigated how broad the impact will be of a decision if we strike
down the claim in this case. Shouldn't we have more briefing on the issue in recognition of how important it was, And I doubt they we'll do that, But I mean her point was, you know, we're just reaching in a darker we don't know exactly how broad of an impact a room for darcy would have.
This is part of a Supreme Court term that could have broad implications for federal regulators. The justices heard arguments in October over whether the Consumer Financial Protection Bureau's funding system is constitutional, and in January it will consider whether to overturn the Chevron doctrine, which is a precedent that
gives agencies leeway when they interpret ambiguous congressional commands. Why this focus and do you think federal regulators should be afraid of what's going to happen this term?
Well, it's plain that the focus has arisen from a deep distrust of the administrative state, and the Court has signaled in a variety of cases is that it wants to pair down the size of government, and it thinks Congress has gone too far in an empowering administrative agencies with the ability to investigate and to proceed against mostly companies who violate the regulations that these agencies have promulgated
in order to enforce a congressional mission. And so these cases, together with the appointments cases and removal cases that the Court previously has articulated, is trying to take another look at how broadly administrative agencies have influence over our lives. But that being said, I think that the Court is proceeding probably a little more slowly now than it thought it might two years ago. My guess is that they will take some steps to curve the power of administrative agencies.
But by ignoring the non delegation argument today, for instance, they have bypassed an opportunity that would really stick a stake in the most administrative agencies directly, because that could have had an incredibly dramatic impact upon administer of agencies had they held that Congress has to be incredibly clear
before an agency can't exercise any power whatsoever. Indeed, because the question in this case was so minor, they had to do with whether the agency could use the judgment to decide whether to bring a fraud case before an Article three judge or before an agency. And the argument that the Fifth Circuit bought was because Congress didn't give any guidance as to inform the agency's choices to which
route to take, that itself violated the Constitution. A decision to uphold that understanding of the non delegation doctrine we have done far more to dismantle this administrative state than with the self of the amendment issue that the court
spent two hours on that oral argument. So yes, they are thinking about curving the power of the administrative state, but they're doing so not in a as aggressive manner as they might have if they had just seized upon the non delegation doctrine as a lever in which to accomplish that result.
We'll see how these decisions come out. Thanks so much, Hal. That's Professor Harold Krant of the Chicago Kent College of Law coming up the racketeering trial of a famous rapper. I'm June Grasso. When you're listening to Bloomberg, who is Grammy winning rapper Young Thug. Is he the ruthless leader of a violent street gang that terrorized Atlanta neighborhoods. Or is he an inspiring success who pulled himself out of
poverty to stardom. Those are the competing narratives presented by the prosecution of the defense as the rapper's trial got underway this week. Young Thug, whose given name is Jeffrey Williams, is charged in a sprawling indictment that accuses him in more than two dozen others of conspiring to violate Georgia's anti racketeering law. He's also charged with gang, drug and gun crimes and a standing trial with five of the
others and dotted with him. Joining me is former US Attorney for the Middle District of Georgia, M Michael Moore Apartment Moore Hall. Even before the opening statements, there have been almost ten months of jury selection in courtroom drama. It started with twenty eight alleged street gang members as defendants. The trial is down to six. Do all these months of problems have any impact on the trial?
Well, I think it could, And I mean we started with an extraordinarily long jury selection, and you know, trying not only to find people who may not have some familiarity with the case, but some famility with witnesses and otherwise, but also folks who may just have the time to sit for this long in a trial like this, it can be difficult. And so I think that started the
case off with some problems. And then you've seen other issues that have come up, with some issues with some of the lawyers and things that have happened in the court room and whether or out there have been rents, and you know, it's been a little bit of a circus, I think at this point and may continue through the duration of presentation.
Tell us about the Rico indictment, about the case, what the prosecution is charging.
RICO really deals with racketeer influenced corrupt organizations, and if you think about it, maybe in Layman's term, that's really talking about things like organized crime. And so you saw some RICO cases that is going after these organizations the mob basically where they would try to take down the mob leader by essentially attributing the bad conduct of his underlings to him. In other words, they didn't have to
find the mafia don pulled the trigger. They could actually have a murder committed by somebody else, but they could talk about this was a goal and an effort of this criminal enterprise to either obtain money or property, and
that's how they went after the organization. Recently, you've seen RICO cases used not only in drug cases and drug conspiracy type cases, but also there was one relatively well known case in Atlanta where a RICO case was used involving public schools and the cheating scandal that went on some of those people. I think indications may've got some of them reversed that some certainly were convicted, And probably the most famous one right now that we're hearing about
is a Trump campaign. But it's a prosecutor's dream really because it allows them to basically paint everybody with the negative brush, and so they can bring in a lot of evidence. They get to attribute all the bad conduct of your Code defendment to you if you're a defendant, and it's more of a I guess the case involving either directions to do wrong or involvement to do wrong, or sometimes just knowledge of people who are doing wrong.
All that evidence gets to come in, and at the end of the day, the prosecution has the jury to convict you because you were part of this organization. So it's not an uncontroversial statute. Many people think that it allows prosecutors too much leeway in bringing cases that they tend most of the time to be complex and involved in sometimes unruly. As you're saying, in this case, this sort.
Of sounds like a movie script because Georgia is accusing this Grammy winning rapper of leading a street gang that's fronted by his record label, and the crimes include killings, and shootings and carjackings, right.
And it's easy, remember, to charge people with a crime and sometimes harder to prove that. And so the state as they do in every criminal case, but certainly here they'll have to come forward and put on some evidence that the main defendant was really in control of what
was going on by other people on the street. I think that gets harder to do if we are just have realistic conversations about what actually happens in the real world in certain neighborhoods and areas of town and that type of thing, and the prosecutors will have to explain how that's not just what i'll call street level crime, but was actually part of this larger umbrella they've charged as part of this Rico case.
They do. You have some people who pled right who are going to testify?
They do?
They do?
I mean, And that's another reason that prosecutors like the Rico case is it allows them to sort of pick off defendants through plea agreements, and then they begin to develop evidence in the case. It's always interesting to me to see how Rico cases can be charged by a grand jury, but then the prosecutor still needs the evidence
from code defendants. Who later plead to try to pull the puzzle pieces together to really give a better picture of what these cases or the organization's charged as part of these cases, what it looks like.
What really interests me in this case is that the judge has ruled that prosecutors can use his lyrics as evidence of his involvement in the crimes. So they can present seventeen sets of lyrics as evidence, provided they can link their content to real world crimes. That's been done before. Is it controversial?
Though it is controversial, and I don't know, frankly how I feel about it. I think it's probably pushing the envelope a little bit. And while it's not the first time, so it's not really pressing a set in there other cases where this has happened, I do think it'll raises some pretty unique questions about the First Amendment about you know, artist creativity and then whether or not later that can
be used in a case. You can think about cases, you know, woe be it for any country music star to either be charged with drug driving or get a divorce because that's going to come up. Does that mean now that that's going to be effence in their case? That they talked about, you know, drinking too many drinks or chasing too many paramoms or whatever the case may be, or you know, smoking too much weed or you know whatever,
is that now going to be the norm. And I think those are the kind of lines where this type of admission of evidence, of this specific type of evidence, that it gets blurry fright then you know, I was thinking, is I thought some about the case that if you're defending a case like this, or you're just representing an artist of music artists, are you well advised to suggest to them but just write a couple of songs with really acceptable lyrics, things like I love the police, I've
never commit a crime, I don't do drugs, and say well here's evidence. Now, by good care, you don't want to if anything ever happen. I want you to put this in. You know, that's something that I'll go into. I assure you that the people who are prosecuting case would say no. But somehow here this evident is coming in.
It limiting instructions too to a jury. And that may be what the judge has in nine when he talks about you have to link it up in office and if he may limit the jury or tell them what you can only consider this and it looks like it went to an actual crime. That those are often a little propylactic enough about it, because juries pay great attention to what prosecutors put into evidence, and a prosecution like
it or not. The reality is that a prosecution team goes in I think oftentimes with an advantage in a case, and that is a jury want to believe them. It's sort of like you want to trust your doctor, you know, you want to trust the prosecutor, you want to trust preachery. It's just something that's sort of ingrained in US, I
think to have this trust. Not everybody, but by and large, I think they look for somebody to explain to them what the case is about, what the evidence is going to show, what it has shown at the end of the case, and they often expect the prosecutor to do that.
And so the fact that the evidence comes in under the guise of a prosecution presentation I don't think is cured by some of the limiting efforts that may have to happen in this case, because we don't know until they get further along that they're going to be able to connect the dots to these specific lyrics, you know, and I think that can pose a problem later.
Some of the references that looked that I've seen are you know, a little ambiguous, and the defense said that not only it's a violation of free speech, but that it would be unfairly prejudicial. So do you think that will be an appellate issue.
I think there's no question. I mean, there have been cases where it's been allowed, but I think this will be right for an appeal, especially when they think about
how broad things have gotten. And I think that's one of the concern and we're seeing in other cases, I mean, right, we're seeing it in political cases too, right now, in those types of things where some of what I would call the protective norms that we've kind of held sacrisine, we're willing to bend those a little bit because we think that the end is going to justify the means
to get there. So, Presidents, here are we getting our hands a little too tightly around the neck of the First Amendment and the free speech of people off for the sake of getting some small piece of evidence in and the hopes that that might be what pushes the jury over the edge to a conviction. As opposed to looking for that evidence through witness testimony, codefindite testimony, physical evidence, videotapes,
whatever it is. We're saying, we're going to sacrifice a little bit of what we've known traditionally as protection as the First Amendment in order to get to this other place. And I do think that's going to raise interesting issues. And even though the evidence has been used in other cases, appellate courts are known as time passes, and things change and the technology evolves and all of that, they're no for shifting or revisiting some of those issues later on.
And so I think this will be ripe if he is convicted, or if anyone is convicted in this trial and the evidence has been used for that, I think this is the kind of thing that will be ripe for an appeal.
In the opening statements, the long opening statements of the defense, the defense attorney told his rags to riches story incidents where the rapper's twenty year old brother was shot near their building, and he sort of changed the narrative. He said, THUG stands for truly humbled under God, and hy s l the alleged gang doesn't stand for young slime. Life. It stands for the luxury clothing brand Eves and Lauran. I mean, he's trying to change the entire narrative of
who this rapper is. Is the jury going to pick between this version of him and the totally opposite version that the prosecution's presenting.
You know, And sometimes lawyers have to sort of dance with what brung them, if you will, and or play the cars they've been dealt. So this case, the lawyer may have been looking for some way to make a distinction. I do think though, that the Ragged the Riches story is the type of thing that plays in what we
talk about him Indigo, and that is the lyrics. And is this artist writing about what he saw as his life experience or an experience of his friends, or something that he believed might be relatable in his music genre to his audience. And it's just something there as opposed to some type of cryptic message about crimes that had taken place or that he had been a part of. And so those will be things they, you know, they
have to ferret out, you know. I'm mindful though, as we think about how a lawyer might you know, change the narrative. I mean, Remember that we've seen in famous cases a narrative change. We've gone from a bloody crime scene photo to scenes of somebody trying to pull on a leather glove and an argument about it. If it doesn't fit, you must have quit, you know, And so the lawyer may try to change that narrative here in
this case to get the jury's attention on. This is who he was, this is how he's come up, This is why he writes these lyrics, This is why he has this circle of friends.
You know.
This is him as a person, but he's now a place where he's so successful that this idea of sort of street crime at the level that's a legend of the indictment is outside of what he does. And that's why he may be talking about things like, you know, designer clues as opposed to the gang name and such as that.
Thanks so much, Michael. That's Michael Moore of Moore Hall. And that's it for this edition of the Bloomberg Launch Show. Remember you can always get the latest legal news by listening to Ourloomberg Law podcasts. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com. Slash podcasts, Slash Law and attorneys looking for legal research. Whether you're an in house counsel or in private practice, Bloomberg Law gives you the edge with the latest in
AI powered legal analytics, business insights, and workflow tools. With guidance from our experts, you'll grasp the latest trends in the legal industry, helping you achieve better results for the practice of law, the business of law, the future of law. Visit Bloomberg Law dot com. I'm June Grosso and you're listening to Bloomberg