State securities regulators throughout the nation are tasked with overseeing compliance with state securities laws and wield broad power to police businesses and individuals accordingly. The Arizona Corporation Commission performs this role in the Grand Canyon State, investigating potential violations and pursuing enforcement action against suspected wrongdoers. The Commission’s enforcement arsenal includes potentially ruinous monetary fines.
Of course, enforcing securities laws is necessary. But that enforcement has to be done without running afoul of the Constitution. And the process by which the Arizona Corporation Commission enforces its rules does run afoul of the Constitution. The Commission’s regulators don’t have to make their case in real courts where a neutral judge and jury provide equal footing for the accused to defend themselves. The Commission instead hauls people before its own administrative tribunals, where the same agency that investigated them, charged them, and wants to fine them also gets to judge their case.
That’s what happened to EFG America, a Mesa-based rubber recycling company founded in 2012 by Douglas Fimrite. EFG developed what it believed to be a proprietary chemical process to recycle waste rubber more efficiently than competitors. Douglas needed to raise capital for the new business, so he sold securities to investors. But in April 2024, the Arizona Corporation Commission filed a complaint claiming EFG sold the securities without proper registration as required by the Arizona Securities Act.
Rather than an actual court of law, the Commission brought its enforcement action before its own in-house administrative law judge without a jury. EFG and Douglas asked the Commission’s ALJ to transfer the case to an actual court where trial would be decided by a jury. But the ALJ rebuffed that request.
This unjust system puts defendants at the mercy of the very agency seeking to punish them by acting as prosecutor, judge, and punisher rolled into one court-like apparatus within the agency’s own walls and without a jury trial.
Throughout American history, juries have served as a vital check against government overreach, ensuring public participation in the justice system. They ensure that our system of government remains one that has the consent of the governed. We, the people, sit on juries to ensure fairness and justice is done in all cases. The system of agency adjudication in Arizona scrambles the vital checks and balances that the state and federal constitutions have put in place to ensure public input, and control, over all government actions by removing they jury—and therefore, we, the people—from the process.
Everyone deserves a jury trial when the government accuses them of wrongdoing and seeks financial penalties. This is true no matter the accusation and regardless of whether the case originates in state or federal government.
The Arizona Corporation Commission is no exception. When the federal securities agency sues for monetary fines in federal court, there’s an established right to trial by jury. The same should apply when a state securities agency sues for monetary fines in state court.
But the Seventh Amendment hasn’t yet been applied to states—a process called incorporation. To protect the rights of all Arizonans—and Americans—courts should extend the Seventh Amendment right to civil jury trials to state prosecution.
Represented by Pacific Legal Foundation at no charge, EFG America is asking the Arizona Supreme Court to find that the Arizona or the U.S. Constitution requires trial by jury in superior court in Arizona Corporation Commission-initiated actions.
Gregory McGill and Ryan McGill of McGill Law Firm are co-counsel with Pacific Legal Foundation.
What’s At Stake?
- The right to a jury trial is a fundamental guarantee of the United States Constitution. The right may not be ignored just because a state government is the one bringing charges.
