Episode description

In this case, the court considered this issue: Does the statutory scheme that empowers the Securities and Exchange Commission violate the Seventh Amendment, the nondelegation doctrine, or Article II of the U-S Constitution?   

The case was decided on June 27, 2024.

The Supreme Court held that when the Securities and Exchange Commission seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial. Chief Justice John Roberts authored the 6-3 majority opinion of the Court.

First, the Seventh Amendment right to a jury trial applies to this SEC enforcement action. The claims are "legal in nature" and closely resemble common law fraud actions. The substance of the claim matters more than its statutory origin or which branch of government brings the action. Moreover, the civil penalties sought are punitive in nature, which is a type of remedy traditionally provided by courts of law rather than courts of equity.

Second, the "public rights" exception to the Seventh Amendment does not apply here because this case does not fall within the narrow categories of matters that have historically been exclusively determined by the executive and legislative branches. The mere facts that Congress assigned the matter to an agency and that the government is the plaintiff do not change this outcome. Unlike the novel regulatory scheme in Atlas Roofing, these SEC fraud claims have close analogues in traditional common law actions that were historically adjudicated by courts with juries.

Because this action is essentially a common law fraud suit seeking punitive remedies, it must be heard by an Article III court with a jury, despite Congress assigning it to an administrative proceeding. This conclusion preserves the constitutional separation of powers and the role of juries in adjudicating traditional legal claims.

Justice Neil Gorsuch authored a concurring opinion, in which Justice Clarence Thomas joined.

Justice Sonia Sotomayor authored a dissenting opinion, in which Justices Elena Kagan and Ketanji Brown Jackson joined.

The opinion is presented here in its entirety, but with citations omitted. If you appreciate this episode, please subscribe. Thank you.