The Supreme Court on June 27, 2024, in a 6-3 ruling in SEC v. Jarkesy, concluded that defendants facing SEC securities fraud charges in which the commission seeks monetary penalties are entitled to a jury trial. Chief Justice John Roberts wrote the majority opinion, with a dissent from Justice Sonia Sotomayor.
The decision adds a new significant constraint to the commission’s authority to pursue cases involving monetary penalties before its in-house administrative law judges (ALJs). The tribunals, however, have faced constitutional uncertainty for years, and the SEC has already largely shifted its major litigated cases to US district court. The case has nevertheless been closely watched for its potential to disrupt agency adjudication across the federal government.
Roberts, in the majority opinion, wrote that that the case “poses a straightforward question: whether the Seventh Amendment entitles a defendant to a jury trial when the SEC seeks civil penalties against him for securities fraud.”
The Seventh Amendment requires that in “suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved.”
“The threshold issue is whether this action implicates the Seventh Amendment. It does,” Roberts wrote. “The SEC’s antifraud provisions replicate common law fraud, and it is well established that common law claims must be heard by a jury.”
Sotomayor, in her dissent, warned the decision “upends longstanding precedent and the established practice of its coequal partners in our tripartite system of Government.” She pointed to ruling’s effect on the “at the very least, more than two dozen agencies that can impose civil penalties in administrative proceedings.”
“Today’s decision is a massive sea change,” she wrote. “Litigants seeking further dismantling of the ‘administrative state’ have reason to rejoice in their win today, but those of us who cherish the rule of law have nothing to celebrate.”
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