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All expressions are those of the speaker. Hello, and welcome to scot Discast.
I'm your host, Kyle hammernis On, behalf of the Faculty division of
the Federalist Society. We are here today to discuss sec versus Jarcasy, which
was argued before the Court on November twenty ninth, twenty twenty three. It
is my honor to introduce our guests today, Peggy Little. Peggy is senior
counselor at New Civil Liberties Alliance and is over three decades of experience as a
trial and appellate litigator representing individuals and high profile litigants, including Fortune fifty companies,
financial institutions, public companies, and universe in both state and federal courts,
including the United States Supreme Court. And with that, I'll hand things
over to our guests. Thank you so much. So I'll start with just
a little background, very short because Jarcacy is a notable case, but for
those who don't know, there were three questions certified by the Supreme Court in
Jarcacy. The first question certified was a jury trial question. I can rephrase
it as essentially, can Congress takeaway constitutionally protected jury trial rights by expanding the
jurisdiction of the SEC's in house tribunals to encompass civil fraud prosecutions for penalties.
Then there was a non delegation claim in the case that the Supreme Court certified,
and that focuses on the fact that the SEC has the choice whether to
prosecute defendants in federal court or where by the way, they have the full
range of constitutional protections, including jury trial, or trying defendants before its own
administrative law judges, where a host of constitutional and procedural protections are unavailable,
especially jury trial. Mister Jarcacy had argued in the Fifth Circuit, and the
Fifth Circuit Court of Appeals agreed that by leaving this choice in the prosecuting agencies
to discretion, that was non constitutional delegation by Congress and that Congress must decide
for itself when and whether SEC defendants get jury trial rights and Article three court
access or it must at the very least provide the agency with an intelligible principle
on which to make that decision, which the statute does not do. And
finally, in the case, there was the issue that the SEC administrative law
judges enjoy too many layers of tenure protection. In the case of the SEC
aljs, it's somewhere between two or three layers of tenure protection, depending on
whether you think the commissioners themselves have tenure protection. But in any event,
it's undebatable that there's at least two, and that the Free Enterprise Fund decision
of twenty ten had held that more than one layer of tenure protection violates the
Constitution. A little factual background George Jarknas he was charged with fraud in twenty
thirteen. He went through an agonizing process going through the administrative law proceeding that
I will spare all of you. But when he finally got to the promised
judicial review circuit, Court of Appeals vacated the SEC's al j as affirmed by
the Commission's decision against him, assessing a three hundred thousand dollars penalty in barring
him from the securities industry, and the Fifth Circuit had held, in what
was widely regarded as a landmark decision, that he his jury trial rights had
been violated. That further, the decision leaving the decision of whether to prosecute
him in a court as opposed to an administrative proceeding was an unconstitutional delegation of
legisltiveslateive power to the admiss the enforcement staff of the SEC. And finally,
the Fifth Circuit Court of Appeals held that the removal protections that are enjoyed by
the sec alj is violated. To take care clause at oral arguments, the
jury trial question occupied virtually every aspect of the argument. In a moment,
I will mention how the non delegation issue ties into that. But the questioning
and the argument whether it was of the Solicitor General or of who was in
the case was argued by mister Fletcher or of the respondent the case is the
questions really focused on the jury trial question. So it is really kind of
hard from that argument to reach any sense of how the course court would handle
two out of the three certified questions. Since jury trial occupied the court's time.
The atmosphere in the room I thought was very It was a genuine attempt
by the court to tackle this important jury trial question. I don't think any
of the judges were treating it lightly or as a frivolous question, and they
were really struggling with some of the line drawing sometimes the judges. The justices
were trying to focus on the question of public and private rights, which proved
to be difficult. In fact, Justice Thomas opened asking the UH for definition
of private rights, and we know from his decision in the acts On case
that he felt strongly that this that where people are charged and their private rights
are at stake, they should be in an Article three court and I don't
think that he would back down from that position. I think that was it
was very clear from the argument that would be consistently his view of things.
Other justices were trying to focus on how and if a claim for fraud brought
by the SEC against an individual maps onto what was common law fraud in seventeen
ninety one and bringing claims for damages, and there was a lot of back
and forth on that. The Solicitor General focused a lot on forum and he
came very close, I thought, to making an argument that I think was
unwise, which was essentially, if Congress assigns the claim to another forum,
presumably an administrative tribunal, that decides the question, and I don't think the
justices, even the ones who might not be inclined to affirm the Fifth Circuit
Court of Appeals, were satisfied with that rather circular, simplistic, and self
serving definition of when you do and do not get a jury trial right.
The Justice Jackson was very active from the beginning, and she correctly, in
my view, focused on the fact that the question is not the forum in
which Congress assigns it, because it would be all too easy for Congress to
simply take common law rights that where jury trial protections are expected to be afforded,
and then just assign them to a different form and then extinguish that right.
I think she understood that problem, and so she was focusing on what
the nature of the cause of action was, which I think is the correct
inquiry to make. I think she I think she's likely to perhaps come out
on the other side of the question, but at least she's framing the issue
looking at the type of action that is being brought by the administrative agency as
the correct thing to analyze as to whether there is a jury trial right.
The arguments went on for some time. Each side got approximately an hour and
fifteen minutes. I don't think anyone felt short changed in the argument, and
there was lively questioning right up front. Justice Gorsich and mister Fletcher tangled on
a few occasions, and that was kind of fun to see. In terms
of drawing distinctions. One thing that came out that I I think qualifies my
earlier statement that the argument focused pretty much completely on jurie trial issues is that
Justice bar in particular, but also Justice Kavanaugh in a somewhat different way.
We're very concerned with the ability of the SEC enforcement staff to essentially decide what
quality and brand of justice that you got. And I do think that mister
Jarcracy's council was effective in talking about the very well known deficiencies of the administrative
process in terms of hearsay and rules of evidence. He actually related the fact
that in mister Jarcrasy's own case, the SEC was successfully able to get hearsay
admitted against mister Jarcacy, and then when they tried to admit here say they
were told that the administrative proceedings do not allow that sort of evidence, even
though they were relying upon it themselves. And that's one of the troubling problems.
Everything is asymmetrical in the administrative proceedings. You are rushed into an early
trial when the SEC has had years to investigate and build a record against you.
You're given a document dump that's almost unmanageable, and then expected to prepare
your defense in mere weeks, and then you wait forever and ever for a
decision from the agency. And I think the disparities of justice there were well
set out, and I think of concern to at least some of the justices.
And so when I say that the jury trial issue occupied virtually all of
the argument, then non delegation issue, which comes into play when the question
is, well can the prosecutor in enforcement stat make the unilateral decision of what
brand of justice do you get? I think that was genuinely troubling several of
the justices. And there were also some ardent defenses of the jury trial right
and how important it was the response the respondents did not ask for Atlas Roofing
to be overturned, and that got raised at several points. For example,
Justice Kagan seemed to feel that Atlas, at least in your questioning of respondence
counsel, Atlas pretty much decides the case, and I don't think that's true.
The problem with Atlas is that's a government on one side of the v
and a company on the other side of the question. And the post Atlas
cases which did constrain that ruling, the cases being told and Grand Financier and
all that were one private party versus another private party, where the question of
denying them jury trial rights is a hard one. And the government certainly was
arguing when the government's on one side of the V while that sort of defines
the issue. And I think that's a troubling argument for them to make,
and I don't think the justices were necessarily buying that wholesale and Respondence Council was
able to cite to an early case in seventeen ninety called King versus Well,
I'm forgetting the name of the person prosecuted for fraud, the government bringing a
fraud claim against an individual who had defrauded people, and is that a private
right or at least a claim for fraud kind of law fraud that where a
jury trial right was recognized in seventeen ninety. And I think that is an
effective rebuttal to the argument that was holding some force for at least part of
the argument that will we post Atlas Roofing case and case law really only applies
between private parties, and when the government is on the other side of the
v it is sort of, by definition, a public right. I think
the public private right issue was exposed in this argument as a deeply unsatisfactory way
to resolve these questions. Justice Thomas asked the Solicitor of General for a definition
and got some pretty simplistic responses from the government. And I think the government
was making arguments that were circular and I think not helpful to its case if
you're really taking these questions seriously. So I think one loser in the argument
was this public private rights distinction insofar as it bears on the jury trial question,
and how unsatisfactory that has been over the years. I suppose one question
that might follow from that is is it possible the court would overrule Atlas Rufe.
I think that's unlikely because the respondent did not ask for it, and
that came up a couple of times in the oral argument, and the Court
is certainly not going to be inclined to overrule a precedent of that long standing
when that hasn't even been requested as part of the relief there. On the
other hand, I think anything as possible, and there might be some justices
who are flirting with that possibility. They might wait for a later case that
presents that issue more cleanly to the court, but it is anything as possible.
Certainly. I would say the Court as a whole was wrestling very sincerely
with the jury trial question, and I think they were concerned with the erosion
of jury trial rights. Now, a contrary view did come up, and
that was that, you know, all the world's got bigger, more complicate,
hated, and Congress has so many things on its mind, and it
has, you know, after one financial crisis or another, or one other
you know, public emergency or another, the courts, the Congress may decide
that it needs to set up remedies for these situations that do not overburden the
courts. And that did come up as a consideration that there are so many
things that Congress needs to remedy that you know, we have to be careful
we're not throwing too many claims into Article three courts and jury trials. I
don't think that was an overwriting concern of a majority of the justices, but
it certainly was a subtext that had considerable play the other uh the I guess
I would call that the beginning of what I would call the Bloodgates issue.
You know, how is this going to play across many agencies? You know,
are we opening up a really flood of problems here where Congress will have
to go back and look at agency adjudication schemes that has set up in which
jury trial rights are not permitted, and do they have to like amend the
statutes and all of that. And I think that was a hard and perhaps
not even fair question to pose it argument, because of course that hasn't been
briefed, and we know that these schemes differ from one agency to another.
Some agencies actually allow people to elect to move their case back into court,
which would certainly be a satisfactory solution, and that was mentioned at argument.
But you know, it's very difficult for any of the parties to effectively respond
to that concern when that was not properly briefed. There was some mention of
supplemental briefing in the discussion at argument that got a kind of dutiful response from
the respondent. I doubt that will take place, but it does. It
does suggest that the Court might decide to rule in a fairly narrow fashion so
as not to implicate those concerns. I can't give you a nose count other
than really, from a very rough assessment, I think it is possible that
the Fifth Circuit would be affirmed on one or more of the questions that were
certified. I certainly don't think I came away from the argument feeling that the
Fifth Circuit would be reversed. But it was not an overwhelming sense that the
Fifth Circuit would be affirmed, and certainly not affirmed on all three questions.
The question that I got the least time was the removal questions. Now that
could be for a variety of reasons. If it would be easy to say,
after attending argument today that the Court will only decide the jury question,
because that's really all that was disgusted argument, and I think that's a fallacious
conclusion to reach. And here's why the Court knows how to certify just one
question if it wants to, and it certified all three, and it required
briefing on all three. And it could equally be true that on the for
example, the removal question, which many people whom I've spoken with and who
have reviewed the briefing and were submitted a Mikus brief, many people think that
the removal question is the easiest one, and so it is entirely possible that
the Court has already polled itself and that they feel that Free Enterprise Fund decides
that question. Certainly, Justice Kagan felt that Free Enterprise Fund had decided the
jurisdictional question in the Axon Cochrane case, And as somebody who had briefed the
Cochrane case, I can tell you, I had argued throughout those proceedings that
Free Enterprise Fund not only decided the jurisdictional question but the merits of whether more
than one layer of tenure protection violates the Constitution. So it is entirely possible
the Court has already reached of a straw vote on that, and so there
was no point in addressing that question at oral argument. As to the non
delegation argument, as I say, it arises and meshes with the jury trial
argument because of the difficulty that several of the judges seem to have about when
you do and do not have access to an Article three court, whether or
not it gives you a jury trial. And I think that was troubling several
of the justices. So I would not rule out the Court reaching the non
delegation question, but it did not get a lot of distinctive argument on its
own merits. At the proceedings, the Court seemed most concerned with dealing with
Atlas Roofing, the Grand Financierra Untold decisions, and whether they did or did
not effectively overrule Atlas Roofing. I think the line drawing, as I said
earlier but I will repeat, was kind of all over the place. Public
do you draw the line at the public private distinction? Do you only award
jury trial rights when there's a suit at common law? And I believe it
was. Justice Gorsis pointed out that, of course, the Dictionary definition of
suit at the time the Seventh Amendment was adopted included a proceeding in any tribunal,
and so I think that the suit distinction is an unsatisfactory one. It
was certainly advanced by the Solicitor General. But I don't think it was a
particularly of distinction in which to decide the jury trial question. I said earlier
that the idea that well, it kindass simply puts you in a certain form,
then you lose your jury trial rights. That that didn't seem to carry
a lot of persuasive weight, And I think the decision is probably going to
turn on the right of action, which is I think the correct focus of
the Seventh Amendment jury trial question, and whether or not this was something that
was analogous enough to a common law right of action recognized in seventeen ninety one,
for which penalties could be sought. And there were some interesting hypotheticals offered
by Justice Roberts up front. He said, well, you know, you
have an interstatehighway system. Could kind of say that, at least on our
roads, we want to put all tour claims into a non Article three court
without juries. Same thing with healthcare. We regulate that heavily. Could we
take medical malpractice claims, for example, and do the same thing. We
want to move them into non Article three courts with no juries and bring our
expertise into deciding these. You know, tough questions of medical malpractice, and
we have an interest as the government in reducing healthcare costs, for example.
And so those were some very interesting hypotheticals that suggested to me that the Chief
was thinking carefully about the fact that this public rights private rights distinction can be
taken quite far, and you know, pretty much everything becomes a public right
if the government has any intersection with the issue at hand, and we could
just extinguish all, you know, all claims that are supposed to be hurt
in courts and are supposed to be decided by juries. One thing I found
disappointing was the provision in the Seventh Amendment which focuses on the fact that juris
are supposed to be fact finders, didn't get a lot of play, so
that I think that's something that I wish had a little bit more development,
because I think that when you have fact finding done by an administrative law judge
who is employed by the very agency that is prosecuting you, and then you
have, you know, eventual judicial review that defers to that fact finding,
that's just such a troubling built in structural bias that I wish that had gotten
a little more development at a oral argument, and it did not. But
you know, perhaps that's something the court understands so thoroughly that it didn't need
a lot of questioning on that. I think that's a pretty description of the
general things that were addressed at oral argument. The general atmosphere in the courtroom,
I think was one of sincere engagement. You could see colloquies going back
between the justices. Very often, one justice would take up another justice's line
of questioning I think Justice sort of I or actually ask the Solicitor General to
please answer the chiefs question, and the we're back and forth with You could
see between Justice fhar and Justice Jackson on some of these very tough line drawing
questions. So I think, you know, in terms of a more general
concern about whether the Court is you know, has retreated into factions, I
think what you saw was a very sincere engagement with some very hard questions as
to which the justices, all of them care deeply. Thank you for listening
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