Back in 2013, the Securities & Exchange Commission (SEC) accused hedge fund manager George Jarkesy of defrauding two investors. Unlike most folks charged with securities fraud, Jarkesy refused to settle and be done with it.
Fast forward 11 years: The Supreme Court (SCOTUS) will soon rule on whether someone charged with a crime by a government agency like the SEC is entitled to a trial by jury under the 7th Amendment. Jarkesy objected to seeing his fate decided by an SEC administrative law judge (ALJ) in addition to the charges against him.
SCOTUS is reviewing a 5th Circuit Appeals court ruling on SEC v. Jarkesy. The High Court will weigh in on whether:
- laws that empower the SEC to “initiate and adjudicate administrative enforcement proceedings seeking civil penalties violate the 7th Amendment”
- the ALJ process violates the nondelegation doctrine, and
- “Congress violated Article II by granting for-cause removal protection to [ALJs].”
Though the case centers on the SEC’s powers, the High Court’s ruling will impact all agencies that prosecute cases in-house, including the Federal Trade Commission, Environmental Protection Agency and many others. Some legal experts expect cited defendants to flood the courts, and for agencies to scale way back on enforcement cases.
Billionaires Want Their Day in Court
A host of well-know billionaires — such as Elon Musk, Jeff Bezos, Mark Zuckerberg and Mark Cuban — emulated Jarkesy by appealing government rulings against their companies to the very end. And sure, they’ve all got the deep pockets to fight the feds. But they also smelled blood in the water as federal courts began chipping away at the power of government agencies.
“I support the right to a jury trial,” Cuban says about a dispute he lost against the SEC 10 years ago. “Period, end of story. There is no constitutional reason or support for the SEC or any government agency to supersede that.” The 7th Amendment reads: “In suits at common law, where the value in controversy shall exceed 20 dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any court of the United States than according to the rules of the common law.“
