Argument Before The Supreme Court on Jarkesy: No Change?
In a lengthy session, the Supreme Court heard oral argument in SEC v. Jarkesy, No. 22-859, a case that many suggested could spell the end of the SEC’s enforcement program by requiring that those charged in its enforcement actions have a Seventh Amendment right to a trial by jury. The government’s final comments during argument on rebuttal summarize what may foreshadow the Court’s decision: Respondent has not asked that the Court’s 1977 decision in Atlas Roofing Co. v. Occupational Safety Health Review Comm’s, 430 U.S. 442, 450 (1977) which rejected a similar claim be overruled or somehow distinguished. Accordingly, the findings of the Fifth Circuithat Mr. Jarkesy had a right to a jury trial in this case should be rejected – there is no Seventh Amendment right to a jury trial that would preclude the SEC from bringing enforcement actions in an administrative forum as authorized by the statutory scheme. Therefore, Respondent’s challenges should be rejected. (The background on this action and a summary of the briefs is available here.)
Fundamental to the claims presented was the key assertion that Mr. Jarkesy, an investment adviser accused of fraud by the SEC and found liable in an administrative proceeding, was entitled to a trial by jury under the Seventh Amendment to the Constitution in any enforcement action initiated by the SEC. Respondent Jarkesy based this claim on the supposition that if the action initiated by the SEC against him as an administrative proceeding was similar to one that could have been initiated in 1791 when the Seventh Amendment was drafted, the person charged in the suit should have a right to have the case heard by a jury. In contrast, Atlas Roofing held that the Seventh Amendment does not require a jury trial in a government initiated enforcement action brought as an administrative proceeding.
The argument focused not just on Atlas Roofing but Supreme Court precedent following that decision. A series of questions by the Court, posed largely to counsel for the SEC, suggested that the teaching of Atlas Roofing is that Congress can create a comprehensive federal regulatory scheme, such as the one reflected in the federal securities laws, which includes administrative remedies used by the agency to enforce the various statutory provisions through litigation initiated either through an administrative proceeding or in federal court. When Congress acts and creates such a statutory scheme it is not required to give those charged with possible violations of the statutes the right to a trial by jury. To the contrary, the agency can be given the choice of filing either a case in court or before an administrative tribunal.The Seventh Amendment does not require otherwise counsel for Petitioner SEC contended.
In considering this conclusion, the Justices drew a distinction between common law cases initiated by private parties and government enforcement actions designed to address what Congress clearly viewed as an issue when creating a statutory scheme such as the one reflected in the federal securities laws. While the Court’s decision will be issued on or before June 30, 2024, the lengthy and repeated questions from the bench during oral argument more than suggest that the decision in Jarkesy will follow Atlas Roofing and clarify its underlying theory. If adopted, that theory will be a clear victory for the SEC.
Argument Before The Supreme Court on Jarkesy: No Change?
In a lengthy session, the Supreme Court heard oral argument in SEC v. Jarkesy, No. 22-859, a case that many suggested could spell the end of the SEC’s enforcement program by requiring that those charged in its enforcement actions have a Seventh Amendment right to a trial by jury. The government’s final comments during argument on rebuttal summarize what may foreshadow the Court’s decision: Respondent has not asked that the Court’s 1977 decision in Atlas Roofing Co. v. Occupational Safety Health Review Comm’s, 430 U.S. 442, 450 (1977) which rejected a similar claim be overruled or somehow distinguished. Accordingly, the findings of the Fifth Circuithat Mr. Jarkesy had a right to a jury trial in this case should be rejected – there is no Seventh Amendment right to a jury trial that would preclude the SEC from bringing enforcement actions in an administrative forum as authorized by the statutory scheme. Therefore, Respondent’s challenges should be rejected. (The background on this action and a summary of the briefs is available here.)
Fundamental to the claims presented was the key assertion that Mr. Jarkesy, an investment adviser accused of fraud by the SEC and found liable in an administrative proceeding, was entitled to a trial by jury under the Seventh Amendment to the Constitution in any enforcement action initiated by the SEC. Respondent Jarkesy based this claim on the supposition that if the action initiated by the SEC against him as an administrative proceeding was similar to one that could have been initiated in 1791 when the Seventh Amendment was drafted, the person charged in the suit should have a right to have the case heard by a jury. In contrast, Atlas Roofing held that the Seventh Amendment does not require a jury trial in a government initiated enforcement action brought as an administrative proceeding.
The argument focused not just on Atlas Roofing but Supreme Court precedent following that decision. A series of questions by the Court, posed largely to counsel for the SEC, suggested that the teaching of Atlas Roofing is that Congress can create a comprehensive federal regulatory scheme, such as the one reflected in the federal securities laws, which includes administrative remedies used by the agency to enforce the various statutory provisions through litigation initiated either through an administrative proceeding or in federal court. When Congress acts and creates such a statutory scheme it is not required to give those charged with possible violations of the statutes the right to a trial by jury. To the contrary, the agency can be given the choice of filing either a case in court or before an administrative tribunal.The Seventh Amendment does not require otherwise counsel for Petitioner SEC contended.
In considering this conclusion, the Justices drew a distinction between common law cases initiated by private parties and government enforcement actions designed to address what Congress clearly viewed as an issue when creating a statutory scheme such as the one reflected in the federal securities laws. While the Court’s decision will be issued on or before June 30, 2024, the lengthy and repeated questions from the bench during oral argument more than suggest that the decision in Jarkesy will follow Atlas Roofing and clarify its underlying theory. If adopted, that theory will be a clear victory for the SEC.