The Constitution separates power, the administrative state fuses it. The Constitution gives Congress the power to make law, the president the power to enforce law, and the courts the power to apply law to specific cases. The administrative state takes all three for itself.
On Thursday, however, the Supreme Court delivered an important blow against that administrative fusion of powers by standing up for the right to have your case heard by a jury. It held that if the Securities and Exchange Commission prosecutes you for fraud, you’re entitled to have your case heard by a jury of your peers.
An administrative agency like the SEC can make a law, charge you for violating it, and prosecute you before its own in-house tribunals—where the judges whose salaries it pays rule in its favor 90% of the time.
That’s what happened to George Jarkesy, who was prosecuted by the SEC in one of its in-house tribunals for allegedly committing securities fraud.
Jarkesy filed suit in federal court to defend his Seventh Amendment right to a jury trial, and 10 years later, the Supreme Court heard his case.
The Seventh Amendment guarantees a jury trial right in all “suits at common law.” One such suit is fraud, and Jarkesy argued that because securities fraud is a type of fraud, he should get a jury.
The government responded that the Seventh Amendment does not apply when the government enforces a “public right,” that is, a right created by Congress through law and entrusted to the administrative state for protection.
Jarkesy replied that the text of the Seventh Amendment makes no such distinctions, and what’s more, the results of the government’s argument would be absurd.
Under the government’s theory, victims of reckless drivers could be forced into administrative law courts if Congress decided that the injured motorist’s recovery of damages mattered less than the public’s interest in highway safety. Same thing for medical malpractice suits—the government has an interest in safe medicine, so it can drag defendants to a Washington back office where a bureaucrat will inevitably side with the agency that pays his wages.
Fortunately, the Supreme Court put the kibosh on those scenarios. In an opinion by Chief Justice John Roberts, the court agreed with Jarkesy. The jury is an indispensable bulwark of liberty. As is making sure that your prosecutor isn’t the one paying the judge.
The question before the court was what, exactly, is included in “suits at common law.” We know some traditional common-law suits, like fraud, nuisance, and monopolization, for example. But we now live under millions of bureaucratic rules and regulations. Do they count, or does the government get to try you without a jury every time it invents a new one?
The court held that whether the government’s case counts as a “suit at common law” depends on whether it resembles any of the traditional suits we know and, more importantly, whether the remedy the government wants is the sort of remedy that courts of law typically give. In Jarkesy’s case, for example, securities fraud is a subspecies of fraud, so the first factor is satisfied. And the government wanted money damages, which is a classic legal remedy, so the second factor is satisfied, too.
That’s not quite the end of the analysis, however, because over the years, the court has invented an exception to the Seventh Amendment for “public rights.” Under that exception, if the government’s suit is trying to vindicate a right that the government invented, then no jury is required. The public rights exception has “no textual basis in the Constitution,” to quote the court, but it is long established in the court’s cases.
The question is whether securities fraud involves a public right. The government, and Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson said in a dissenting opinion that a case involves a public right any time the “Government has acted in its sovereign capacity to enforce a new statutory obligation.”
Roberts and the five remaining justices balked at that expansive rule. Not only is it unsupported by the court’s old public-rights cases, worse, it could “swallow” the Seventh Amendment whole.
The majority concluded that public rights include only specific issues identified in those old cases, like collecting revenue, immigration law, and granting public benefits. But fraud, of any sort, is plainly far afield of those, and therefore, you get a jury in fraud cases.
Justice Neil Gorsuch, joined by Justice Clarence Thomas, wrote a concurring opinion to recount the historical origins of American juries and how important they are to protecting liberty. They also reminded Americans that we should not undermine important safeguards any time someone unpopular—and Jarkesy may very well have committed securities fraud—finds himself under the government’s thumb. After all, “while incursions on old rights may begin in cases against the unpopular, they rarely end there,” they wrote.
The dissenters took a broad interpretation of the court’s prior public-rights cases and then attacked the majority for disagreeing with their interpretation, saying that it “significantly undermines” the rule of law and “prescribes artificial constraints on what modern-day adaptable governance must look like.”
But, as Gorsuch points out, that charge is hypocritical. First, the dissenters’ view almost erases the Seventh Amendment in federal cases, which is one of the most important rule-of-law safeguards we have. Second, the dissenters’ broad interpretation is, itself, out-of-step with the old cases. And third, the public-rights exception has no constitutional foundation.
How bold to accuse someone of undermining the rule of law while ignoring the law yourself.
Although the ruling forces the SEC to respect a core constitutional right, the decision hardly prevents the SEC from fulfilling its mission. Until the passage of the Dodd-Frank Wall Street Reform Act in 2010, the SEC always brought its cases in courts rather than in-house tribunals, and it can still do so now. All that has changed is that the people it targets once again benefit from the assurance that the judge isn’t being paid by the prosecutor.
It’s only a basic bulwark of liberty, but it’s often good to go back to the basics.
