The Supreme Court on Wednesday will hear arguments in a case that hinges on whether, as a legal matter, Congress can blend powers the Framers of the Constitution carefully kept separated.
In Securities and Exchange Commission's (SEC) v. Jarkesy, the justices will determine the constitutionality of the agency's system of in-house administrative law judges (ALJs), bureaucrats who often act as judge and jury in the agency's enforcement actions. Since many federal agencies—including the Federal Trade Commission (FTC), the Environmental Protection Agency, and the Postal Service—utilize ALJs, the case's outcome will reverberate across the administrative state.
George Jarkesy, whom the SEC accuses of securities fraud, argues that the ALJ system violates the Seventh Amendment, which guarantees the right to a jury trial. The U.S. Court of Appeals for the 5th Circuit ruled for Jarkesy in 2022. Should the Supreme Court do likewise, countless Americans would regain access to a foundational constitutional protection.
ALJs often substitute for federal district courts to adjudicate agency enforcement actions, creating myriad due process violations. The SEC chooses its preferred forum to pursue cases largely at its own convenience. Administrative trials guarantee the accused fewer safeguards, including scant discovery opportunities and unfriendly evidentiary rules. Agency enforcement officials work closely with commissioners, who review ALJ decisions. Effectively, "the prosecutors act as counsel to the very people who will be adjudicating their case," as the Cato Institute writes in an amicus brief. Moreover, Cato's brief relates, "[t]he close relationship between SEC enforcement staff and the in-house adjudicators has led to breaches of confidential information," affecting "dozens of cases, including Jarkesy's."
Effectively, this system makes agency staff not just judge, jury, and executioner, but prosecutor and appellate body as well. As of 2014, when Jarkesy's administrative trial began, ALJs had never ruled against the SEC. Conversely, the agency had won only 61 percent of cases brought in Article III courts.
Defendants may appeal ALJ rulings to SEC commissioners—but with similarly predictable results. As noted in the Cato brief, "From 2010 to 2015, the Commissioners decided 95% of appeals in the agency's favor, sometimes overruling ALJ decisions that were more favorable to the respondent only to impose harsher sanctions."
Only after an in-agency appeal can a defendant escape this regulatory Bermuda Triangle and seek redress in a federal appeals court. As evidenced by Jarkesy's case, this process costs defendants many years and untold legal fees.
Concurring in Axon v. FTC (2023), Supreme Court Justice Clarence Thomas argued forcefully that Congress may not, constitutionally speaking, transfer fundamentally judicial powers to executive agencies (as it has done with the SEC). Considering the historical and legal record, Thomas concluded that whenever the government seeks to deprive a citizen of "private rights"—natural rights to life, liberty, and property—Article III courts must have original jurisdiction, which includes fact-finding. "This mixed [ALJ] system—primary adjudication by an executive agency subject to only limited Article III review—is unlike the system that prevailed for the first century of our Nation's existence," Thomas wrote.
To punish alleged fraud, the SEC sought to impose large fines on Jarkesy and bar him from working in his chosen profession. This clearly implicates his private rights to liberty and property—a conclusion obvious from both the 5th Circuit and Thomas's opinions. Therefore, only a jury—not an extra-constitutional administrative tribunal—can remove them.
As the 5th Circuit noted, requiring regulators to bring enforcement actions before juries would not meaningfully disrupt their work. Since "the SEC has in fact brought many such actions to jury trial over the years, then it is difficult to see how jury trials could 'dismantle the statutory scheme,'" Circuit Judge Jennifer Walker Elrod wrote. "In this case," she continued, "the SEC took seven years to dispose of Petitioners' case and makes no argument that proceedings with a jury trial would have been less efficient."
The real benefits of the ALJ system accrue to regulators, whom it frees from the constraints of ordinary due process and checks and balances. "The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny," as James Madison wrote in Federalist No. 47.
The right to trial by jury, developed in the English common law, is central to the Anglo-American conception of good governance. Noted 18th-century English jurist William Blackstone declared the right "the glory of the English law." John Adams called it (alongside representative government) "the heart and lungs of liberty." And Thomas Jefferson considered it "the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution."
Moreover, concern for jury trials shaped early American political history. The Declaration of Independence denounced King George III for "depriving" Americans of jury trials. During the ratification era, the original Constitution's failure to guarantee jury trials in civil cases drew fierce criticism from such eminent leaders as Virginia's George Mason and Massachusetts' Elbridge Gerry. This movement culminated in the Seventh Amendment's ratification.
The American legal system—when functioning properly, at least—prevents the state from satisfying itself with a citizen's guilt and summarily punishing him. Instead, officials must convince a jury of the accused's peers—generally in an open courtroom. Luckily, Mason, Gerry, and others lobbied for the Seventh Amendment. It was designed to prevent precisely the sort of tyrannical shenanigans that Madison warned of and that the ALJ system promotes.
The current Supreme Court has ruled unconstitutional many excesses of the administrative state, and it should do so again.
The post Do You Still Have the Right to a Jury Trial? appeared first on Reason.com.
