SEC v. Jarkesy - Post-Decision SCOTUScast

of the Federalist Society. We are here today to discuss sec. Versus Jarkaesi, in which the Supreme Court issued a six ' to three decision on June twenty seventh, twenty twenty four. It is my honor to introduce our guests today, Devin Watkins. Devon is an attorney at the Competitive Enterprise Institute. Devin previously worked at the Cato Institute as a legal associate and intern at the Institute for Justice. And with that, I like to turn things over to Devin to get us started.

agencies go through. But in many ways Tarkasias is important for the adjudication process, is as the overturning of Chevron was for the rule making process. This is the other half of agency's formal powers. So in this case, let me go into a little bit of the kind of factual background. At least according to the ALJS, is found

by the SEC. Darkasey had claimed to brokers and investors that some prominent accounting firm would audit the hedge fund, that some prominent investment bank would serve as the fund primary broker, and that half the funds would be invested in life insurance policies. The LJ found that no audit had taken place, no prime vocage account was open, and only twenty percent was invested, and so he The ALJ and the SEC found that Jarkisey had committed securities fraud.

Now I don't know if these facts are true or false, and there was no jury involved in this, despite the fact that Darkasey had asked for one. The Fifth Circuit reviewed the findings of the SEC and LJ and they found that there were three problems with the process that

the SEC went through. Specifically, that the SEC had the discretion to bring the case either within federal court or with through his administrative process, but that there was no intelligible principle telling the SEC which one it should go for, and so it violated the non delegation doctrine for the SEC to make that choice without being told by Congress

how it should be making that choice. The second problem was that there was a four cause restriction on the administrative law judges removal that violated Article two in the Separation of Powers. And lastly, that Jarghesi was entitled to a jury trial on the Seventh Amendment. Now, the Supreme Court only decided that third question specifically on the Seventh Amendment and left the other two to go back to the Fifth Circuit in the future cases. So those two

are still live issues in future cases. But because the Supreme Court was able to resolve it entirely on the Seventh Amendment rouds that is then entire basis for the Supreme Court's opinion, So I'm going to be focusing on that aspect of it here. So the Seventh Amendment says, in suits a common law, where the value and controversy shall exceed twenty dollars, the right of trial by jury shall be preserved. So the key question then in this

case is what is a suit at common law? According to the sec any administrative action brought in its administrative forum is not a suited common law because a suited common law meant an in federal court. If you don't go to court, it's not a suit, and therefore it doesn't matter. Under the Seventh Amendment. We don't need a jury as long as we don't bringing it outside of an Article three court. Now, there's some problems with this.

If that were actually the case, then Congress could effectively eliminate the Seventh Amendment right and just assign everything to administrative forums or outside courts and just eliminate the right to a by jury in all actions. And that seems rather absurd given the history of the Seventh Amendment. The Seventh Amendment was created in response to certain abuses by the English government that occurred shortly before the American Revolution.

There was a lot of restrictions on trading, specifically that certain goods and ships had to go through Everything had to go through England, had to be bought and sold certain goods through England before it could come to or be sold by the American colonies. This caused prices to go up a lot more than if they had sold directly to foreign governments or foreign individuals, and there was a lot of Americans were upset by that, and because of that, there was a lot of Americans that committed

smuggling and kind of avoided those restrictions. The British government then brought smuggling charges against American colonists, and the American colonists who sat on juries were rather hesitant to convict their fellow American colonists of these crimes. They were very skeptical and kind of really pushed back against a lot of the extravagance and a lot of the prosecutions. And there was a lot of complaints by the British governors

that were selected by the English authorities about this. So what the English Parliament decided to do is transfer all of these from common law courts to admiralty courts that had no jury trials and therefore bypassed the right to a jury and just have individuals that were selected by the British government deciding if these people were guilty in issuing fines. That was the history that then led to the Seventh Amendment that protected these kind of actions and

ensured that a jury trial would be allowed. Now it does say ensues a common law to the founding, there was kind of three different areas of law where different cases could be brought. You could bring cases in the common law courts, the courts of equality, equity, and the courts of animalty. The animalty courts are for things that occur on the high seas. There's a natural reason to not have a jury in these cases because the actions

occur to the high seas. There is no local jury in the middle of the ocean that you can then call forth to being to decide issues of fact. Issues of equity was another exception that is distinguished from court from common law courts. In these cases, you're not trying to punish anyone. You're not taking property from them that

they own because they committed some wrongdoing. Instead, you're saying what needs to happen in the future to follow the law, and you're trying to set things right because you're not actually punishing anyone, and there's no decision as to some

bad act that occurred in the past. The ability for the government to kind of abuse that process even without a jury is a lot less because any decisions made would not generally apply just to the individuals involved, but would then be applicable to anyone in society under equal facts. And so in those cases ad Multy and Equity, the founders not believe that a jury was required, but they did want to preserve it as suits of common law. Now suits at common law only meant cases brought in court.

It can be easily evaded. Instead, at least my opinion is that suits of common law meant suits that at that time would have been brought in common law, meaning that there are suits for damages or to remedy past harms by taking property that they that people had and giving it to those that were harmed, or to the government. Any of these kind of cases or suits at common law, and those kinds of cases we need to have a jury trial, and that's mostly what the majority held in

this case. One of the key problems is that there are some cases what's called public rights cases, where there was no jury involved in the process. Now, a lot of these are cases where even I would not characterize them as suit as a common law, although they might involve money. An example might be a federal benefit program. The government is handing out money, and it's not taking money from people that is properly their The adjudication of

that is not a suit at common law. There's no punishment involved in making such a decision, and sol though it involves money, it can be done outside of the jury process. There's a variety of other areas that the court identifies, such as certain immigration law, some tax law. For instance, some tax collector is taking money in for the government, and although they take the money into the government, they then fail to pass it along to the treasury.

The government can go and say, look, you use that money to buy the house. We're now going to sell that house and collect the money that is properly are as the government. We're not just punishing you because of this, We're just trying to take the money that the government already owns. This is our money. And so in those kind of what's called public rights cases. No jury needed

to be involved, and those all started perfectly acceptable. You know, some of these public benefits, some tax cases, stuff like that.

There were several of these kinds of cases. The problem is that in the nineteen seventy seven case of Atlas Roofing, the Supreme Court expanded that public rights doctrine to include not just those kind of traditional areas where most people would say that's not a lawsuit at common law, but tried to then claim that any time the government is exercising sovereign power related to a federal statute that gives the government that power, that it automatically then becomes a

public right, and therefore the government can bypass the jury trial right. I actually filed a brief in darkase and asked the Supreme Court to overrule Atlas Roofing. The majority declined to do so. Instead, what they decided to do is distinguish Atlass Roofing and say that the Osha Act did not involve the kind of traditional common law actions

like involved in this case. In this case, which involved securities fraud, the court found it was very similar to common law fraud that would have been brought in a common law court at the founding and therefore was clearly a suit at common law at the time of the founding, and then distinguished the Osha Act and said, that's an

entirely separate scheme. It was unrelated to a lot of things that occurred at the founding, and therefore we don't need to deal with that, this roofing and this constitutionality right now. Instead, it relied upon two cases Toll the United States and Grand Faresea bian Norberg. This was in nineteen eighty seven. In nineteen eighty nine, case Told dealt with the Clean Water Act and a bind that was issued.

The court there said a bine under the Cleaning Water Act was very similar to an action in debt at common law and therefore would fall within the Seventh Amendment. And in Grand Faresea, the court said that a fraudulent and conveyance actions are legal in nature sure and require

a jury trial. So it was those cases that the majority primarily relied upon to say that a securities fraud case is similar enough to assuit a common law that it needs to have a jury trial to be able to be functional, and this and often will push the case out of administrative forum because administrative forums don't have jury trials. The ability to bring these cases in administrative and forum is going to be limited. Instead, a lot of these cases are going to then be brought in

Article three courts where they can have jury trials. And these cases really should be an Article three court, so you have a real jury that is going sorry, a real judge that can evaluate these under Article three as well as a jury. I think both of those are true.

Although this case focused specifically on the right to a jury trial, now, the dissent primarily focuses on the fact that although the Court distinguished at List Roofing, according to this assent, it shouldn't have that Atlas Roofine really controlled this case. That this case. While the majority said that the remedy at issue issuing a monetary fine is what causes this to require a jury trial under the Seventh Amendment, the sense said, look, Atlas Roufine had a fine just

like this one. And it said that the security and the Descent claims that the securities fraud statue is the creation of a new statute, not the same as the common law fraud because it doesn't require any kind of injury to private parties. It is brought by the government in its sovereign capacity and directly by the government. It's not a litigation between two private parties. Now I have some you know, I can see that as sense point. In some ways, I agree that this is not that

much different between Atlas Roofine. This is why we asked that Alice Roufing be overruled. We think that Lias Rufe is wrong to decide that the Supreme Court was kind of careful not to say whether Atlas Ruvine was rightly decided. In fact, they suggested, and that Alice Ruvie may already have been overturned, but they don't actually decide that here, which is kind of strange. Usually the Court is clear what cases are good law and what cases are it's

not good law when it's citing those cases. But the Descent also takes issue with the fact that the majority is kind of making that kind of distinction where it says, we're going to distinguish Atlas Rufine, but we're not going to say if Atless Rufine is good law. So I can understand why the Ascent is making those claims. I would just say that even if the Ascent is right, I think the Court should have overruled at this Rufie.

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