Discourse: In SEC v. Jarkesy, the Supreme Court Restored Core 7th Amendment Protections

It all began in 2013, when investment adviser George Jarkesy was accused by the Securities and Exchange Commission (SEC) of securities fraud. But instead of proving its case against Jarkesy to an independent judge and jury, SEC lawyers turned to an SEC tribunal and an SEC-employed administrative law judge to prosecute the defendant. When that judge predictably ruled against Jarkesy, his only avenue for relief was an appeal—to the SEC commissioners, the people who had approved the case against him in the first place. Only after this years-long process was Jarkesy allowed to seek review in the U.S. (Article III) court system.

When he finally reached federal court, Jarkesy argued that the SEC’s in-house prosecution denied him his Seventh Amendment right to a jury trial. Ultimately, in June’s SEC v. Jarkesy decision, the Supreme Court agreed with him, explaining that the Seventh Amendment was derived from a long tradition in Anglo-American law guaranteeing a civil jury trial, including for those targeted by the government. But to the dissenting justices and the chattering classes, the Jarkesy decision is a dangerous novelty that will upend the administrative state.

A Long-Standing Legal Right

In fact, the dangerous novelty is a 1977 decision called Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n, in which the Supreme Court jettisoned centuries of legal tradition. In Atlas Roofing, the Court gave preference to (supposed) efficiency and expertise over constitutional principles, holding that Congress could “assign” various government claims to executive branch tribunals without juries.

It’s true that the government could always assign “public rights” cases to jury-less tribunals—cases involving, for example, disputes concerning how the government disbursed government-owned property. But Atlas Roofing went wrong by defining public rights cases so broadly that Congress could assign virtually all disputes—even those involving private rights—to executive branch tribunals.

Jarkesy merely corrects that error and once again ensures that American citizens—even unsympathetic ones like perhaps Jarkesy himself—may demand a jury of their peers when the government comes after them. Now, when the government seeks to deprive parties of their core private rights, it will no longer be allowed to funnel those cases into friendly in-house tribunals.

This is how it should be. Indeed, the Court in Jarkesy observed that “[t]he right to trial by jury is ‘of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right’ has always been and ‘should be scrutinized with the utmost care.’” Our Founders agreed—especially “[w]hen the British attempted to evade American juries by siphoning adjudications to juryless admiralty, vice admiralty, and chancery courts,” which Americans condemned “for ‘subvert[ing] the rights and liberties of the colonists.’”

And when the British continued to deny Americans their long-held right to jury trials, Jarkesy observed, “the Founders cited the practice as a justification for severing our ties to England.” Indeed, among the Declaration of Independence’s charges against King George III was his “depriving us in many cases, of the benefits of Trial by Jury.” After the Revolution, the most serious threat to the proposed Constitution was its lack of a civil trial guarantee. Therefore, the Founders “adopted the Seventh Amendment to fix that flaw.” And by doing so, they “‘embedded’ the right in the Constitution, securing it ‘against the passing demands of expediency or convenience.’” Since then, the Court said, “every encroachment upon it has been watched with great jealousy.”

Public Rights?

But over time “expediency and convenience” trumped core constitutional protections. As noted above, the Supreme Court’s Atlas Roofing decision held that Congress could properly assign public rights cases to jury-less tribunals. But the Court’s circular definition of “public rights” cases—“cases in which the Government sues in its sovereign capacity to enforce public rights created by statutes within the power of Congress to enact”—gave Congress virtually unlimited discretion to assign any statutory enforcement claim to executive branch tribunals. The Court ignored the traditionally limited scope of public rights cases: those involving actions that only the government can take, such as disbursing government land or benefits, revenue collection or immigration.

After erasing those traditional limits, the 1977 Court concluded that for new statutory claims, Congress could assign the “factfinding function and initial adjudication to an administrative forum with which the jury would be incompatible.” Atlas Roofing also declared that Congress need not “choke the already crowded federal courts” with “new types of litigation.” Thus, function and efficiency trumped constitutional rights.

The Jarkesy dissent, written by Justice Sonia Sotomayor, agrees with this pragmatic deviation from constitutional principles. In her view, virtually any new cause of action by the government acting in its “sovereign capacity” for the public good is a public rights case that may be tried without a jury. But because the government always acts in its sovereign capacity, this public rights exception would swallow the rule and eliminate the Seventh Amendment for every new legal claim the government makes against American citizens.

And in any event, as the Jarkesy majority explained, Atlas Roofing “represents a departure from our legal traditions.” Both before and after Atlas Roofing, the Supreme Court had held that “Congress cannot ‘conjure away the Seventh Amendment by mandating that traditional legal claims be … taken to an administrative tribunal.’” Thus, “[w]hen a matter ‘from its nature, is the subject of a suit at the common law,’ Congress may not ‘withdraw [it] from judicial cognizance.’”

Predictably, opponents of the ruling continue their Chicken Little prophesizing about the end of government. A representative complaint is that the Jarkesy decision “undermines the government’s ability to do its job.” But the government has never had the authority to “do its job” by any means necessary. As Justice Neil Gorsuch noted in his concurrence, the Seventh Amendment, Article III of the Constitution (establishing an independent judiciary), and the Fifth Amendment’s due process clause work together “to limit how the government may go about depriving an individual of life, liberty, or property.”

Similarly, the Sixth Amendment prevents the government from imposing criminal liability on individuals without a public jury trial in court. None of these fundamental protections are said to “undermine” the government’s ability to “do its job.” It’s an ahistorical and extra-constitutional argument that arises only in defense of the modern administrative state.

In the end, the Supreme Court’s decision in Jarkesy restores the Seventh Amendment to its proper place among the Constitution’s most vital protections of individual liberty against arbitrary government actions.

This op-ed was originally published in Discourse on August 21, 2024.