Tag: Jarkesy v. SEC

Future of SEC’s ALJs looks bleak—but the administrative state? Not so much

Last week, SCOTUS heard oral argument in Jarkesy v. SEC (BTW, pronounced Járk?z?, according to his counsel).  As you may have heard, that case is about the constitutionality of the SEC’s administrative law judges. There were three questions presented, and Jarkesy had been successful in the appellate court on all three:

“1. Whether statutory provisions that empower the Securities and Exchange Commission (SEC) to initiate and adjudicate administrative enforcement proceedings seeking civil penalties violate the Seventh Amendment.   

 2. Whether statutory provisions that authorize the SEC to choose to enforce the securities laws through an agency adjudication instead of filing a district court action violate the nondelegation doctrine.   

 3. Whether Congress violated Article II by granting for-cause removal protection to administrative law judges in agencies whose heads enjoy for-cause removal protection.”

While, on its face, the case may not have much allure, it has the potential to be enormously important in limiting the power of the SEC and other federal agencies. That’s especially true if SCOTUS broadly decides that the statute granting authority to the SEC to elect to use ALJs violates the nondelegation doctrine. This case, together with the two cases to be heard in January addressing the continued viability of Chevron deference (see this PubCo post), could go far to upend the “administrative state.” And, for those justices with a well-known antipathy to the administrative state, that might be their ultimate goal. (See, for example, the dissent of Chief Justice Roberts in City of Arlington v. FCC (2013), where he worried that “the danger posed by the growing power of the administrative state cannot be dismissed.”) During the over two-hour oral argument, however, the discussion was focused almost entirely on the question of whether the SEC’s use of an ALJ deprived Jarkesy of his Seventh Amendment right to a jury trial—certainly an important issue with possibly far-reaching implications across federal agencies. But what was most conspicuous—and perhaps most consequential—was what was not discussed: the nondelegation doctrine. In case I missed it, I searched the 170-page transcript and found the word “nondelegation” only once and that from the lips of SEC counsel. While, at the end of the day, the Court’s opinion could certainly go in a different direction, the oral argument did not leave the impression that the end of the administrative state is nigh—not as result of this case, at least.