The Persistence of Public Rights Doctrine (Jarkesy Oral Argument Edition)
The good news coming out of yesterday's oral argument in SEC v. Jarkesy is that the Justices and advocates spent almost no time discussing two of the Fifth Circuit's preposterous reasons for finding that SEC enforcement actions are unconstitutional.
(1) The Fifth Circuit had said that Congress, in leaving to the agency the decision whether to bring an enforcement action in the agency or in federal court, violated the nondelegation doctrine by failing to provide an intelligible principle. That's absurd because federal enforcement agencies routinely exercise enforcement discretion--for example about whether to bring a prosecution at all--that is equally unguided by legislation and that has higher stakes. If this is a violation of the nondelegation doctrine, everything is.
(2) As an alternative ground for its holding, the Fifth Circuit invoked the SCOTUS decision in Free Enterprise Fund v. Public Co. Accounting Oversight Bd. to hold that the two layers of for-cause protection against Presidential removal for Administrative Law Judges (ALJs) is unconstitutional. This conclusion has at least a formalistic justification. ALJs do indeed have two such layers. However, by marked contrast with the executive officials in Free Enterprise Fund, that's because they're adjudicators, for whom insulation from executive supervision is designed to ensure fairness and impartiality. And their policy-making authority is limited by intra-agency review. For just these reasons, when the Court invalidated the two-layer protection for members of the PCAOB in Free Enterprise Fund, it went out of its way to note (in footnote 10 of the majority opinion of Chief Justice Roberts) that the holding did not necessarily apply to administrative law judges within independent agencies.
Neglecting those issues, the oral argument focused almost entirely on the question whether SEC civil enforcement actions within the agency violate the Seventh Amendment because they do not use juries. That issue also ought to have been easy--and for at least some of the Justices it was. After all, Atlas Roofing Co. v. OSHA answered exactly this point in 1977, rejecting the notion that an an administrative proceeding within an agency to vindicate public rights created by statute is "a suit at common law" for which the Seventh Amendment demands a jury. The Court wrote:
We cannot conclude that the [Seventh] Amendment rendered Congress powerless when it concluded that remedies available in courts of law were inadequate to cope with a problem within Congress' power to regulate -- to create new public rights and remedies by statute and commit their enforcement, if it chose, to a tribunal other than a court of law -- such as an administrative agency -- in which facts are not found by juries.
Ah, but what are "public rights" cases? The short answer is that it has always been understood to include, at a minimum, civil actions by the government to enforce obligations created by statute. The lawyer for respondent Jarkesy pointed to some cases in the last three decades in which the Court had fuzzed up the boundary of public rights cases, but, as Justice Kagan pointedly observed, in those cases the Court had expanded the category of public rights, whereas for Jarkesy to win on his Seventh Amendment claim, he needs to show that a heartland public rights case--a civil enforcement action by the government--was not in fact a public rights case.
Although attorney Michael McColloch, arguing for Jarkesy, denied it, he was effectively asking the Court to overrule Atlas Roofing and indeed the whole notion of public rights, which has deep roots in the Court's jurisprudence. Already in 1856, the Court understood itself to be reciting the long-established received wisdom when, in Murray's Lessee v. Hoboken Land & Improvement Co, it said this: "there are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which Congress may or may not bring within the cognizance of the courts of the United States, as it may deem proper."
The best argument on offer for abandoning or dramatically curtailing the public rights doctrine and for expanding the constitutionally required use of juries in civil enforcement actions brought by the government came from Justice Gorsuch, who, through a series of hypothetical questions (including a bizarre one that asked about the Sedition Act but not about its obvious violation of the First Amendment), implied that it's not fair for the government to seek substantial monetary penalties before administrative adjudicators sitting without a jury.
There is something to that. If we think that juries are important protections against unfairly depriving people of their life, liberty, and property, then we might think Congress should be required to put all those cases that can be adjudicated by a jury before a jury. Justice Kavanaugh made the point in a question to Principal Deputy SG Brian Fletcher when he asked "what sense does it make to say the full constitutional protections apply when a private party is suing you, but we're going to discard those core constitutional historic protections when the government comes at you for the same money?" Justice Alito re-asked a version of this question later, referring to it as the "theory of the Seventh Amendment."
But this line of functional argument proves way too much, because it undercuts distinctions drawn by the text of the Constitution. After all, no one is entitled to a jury in a case for injunctive relief--which is a suit in equity, not, as required by the Seventh Amendment, one "at common law"--even though the stakes for the plaintiff and defendant in an equitable action can be substantially higher than in a common law suit for money damages. Nor is there any entitlement to a jury in admiralty cases. And when the government sues to vindicate rights of the public created by statute rather than the invasion of the government's own common law interests (such as in government property), that is not a case at common law either.
Meanwhile, there is a constitutional provision that requires juries in government enforcement actions: the Sixth Amendment so demands, but only in criminal cases. We could think of that distinction as sensible. After all, the stakes are higher where the defendant could be incarcerated or even executed than where the defendant could be subject only to a civil penalty.
But even if the distinctions among suits at common law, suits in equity, cases in admiralty, and criminal prosecutions are suboptimal, they are firmly rooted in the constitutional text and history. Although I generally agree on this point with my friend and co-blogger Professor Segall, who previewed the oral argument in Jarkesy by decrying the turn to text and history, it's notable that Justice Gorsuch and the other Justices who expressed sympathy for Jarkesy's argument yesterday, are all in on text and history. And yet, there was Justice Gorsuch in yesterday's argument blithely conflating the Sixth and Seventh Amendments, as when he asked/opined: "Well, we'd agree that the right to trial by jury, whether it's criminal or civil, is a very important foundational freedom in -- in American society and a check on all branches of government, wouldn't we?"
At least with respect to the scope of the Seventh Amendment, the text and history point fairly decisively away from Jarkesy's view and towards the longstanding precedent reflected in Atlas Roofing.
To be sure, the government's position is not entirely unproblematic. Deputy SG Fletcher was most defensive in trying to explain why an SEC civil enforcement action is not a suit at common law when brought in the agency but is a suit at common law when brought in a federal district court, which he conceded it is. His answer turned on the different tests the Court has articulated for whether a case can be heard in an agency at all (which is about the implications of Article III) versus for when a jury is required in federal court (which is about the Seventh Amendment). I followed his argument, but I'm not sure how persuasive it was--or even how persuasive it could be, given the Court's use of the public rights doctrine in both settings.
Given the seeming willingness of at least some of the Court's conservatives to treat the Seventh Amendment issue as calling for a policy judgment that they will then undoubtedly dress up in originalist garb, the sticking point may well be how disruptive the requirement of juries will prove to be. The Court could write an opinion that requires juries when agencies seek fines but not when individuals seek benefits, but the likely impact of even a partial affirmance of the Fifth Circuit's Seventh Amendment holding is substantial, as it would affect many agencies besides the SEC.
Should the Court reject Jarkesy's Seventh Amendment argument (as I believe it should), it will then need to address the Fifth Circuit's other grounds for its decisions. Justice Kavanaugh asked one question of Deputy SG Fletcher about the removal issue and got a short reply. No Justice asked any questions about the nondelegation issue. Presumably the lack of interest is indeed the good news I noted at the top of today's essay. If so, then if the Court also rejects the Seventh Amendment claim, we can expect it to make quick work of those other two issues.
A more pessimistic reading of the argument is that the conservative Justices didn't ask about the removal or nondelegation issues because they don't think they will need to reach them, as they plan to rule for Jarkesy on the Seventh Amendment ground. After all, they have plenty of other opportunities to continue their project of deconstructing the administrative state. Whatever they don't accomplish in Jarkesy will likely come soon enough.