Speaker 1: Welcome to sco Discast, a project of the Federalist Society
Speaker 1: for Law and Public Policy Studies. Our contributors joined us
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Speaker 1: US Supreme Court cases as they are argued and the
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Speaker 1: of the speaker. Hello, and welcome to scot Discust. I'm
Speaker 1: your host, Kyle hammerniz On, behalf of the Faculty division
Speaker 1: of the Federalist Society. We are here today to discuss sec.
Speaker 1: Versus Jarkaesi, in which the Supreme Court issued a six
Speaker 1: ' to three decision on June twenty seventh, twenty twenty four.
Speaker 1: It is my honor to introduce our guests today, Devin Watkins.
Speaker 1: Devon is an attorney at the Competitive Enterprise Institute. Devin
Speaker 1: previously worked at the Cato Institute as a legal associate
Speaker 1: and intern at the Institute for Justice. And with that,
Speaker 1: I like to turn things over to Devin to get
Speaker 1: us started.
Speaker 2: I'm happy to be here, so I'm here to talk
Speaker 2: about Jarkasey, which at least in my opinion, is one
Speaker 2: of the most important Supreme Court decisions in a very
Speaker 2: long time. There are probably two critically important Supreme Court
Speaker 2: decisions this term on the size, scope and power of
Speaker 2: the administrative state. Of course, the overturning of Chevron has
Speaker 2: enormous implications for the rule making process that all federal
Speaker 2: agencies go through. But in many ways Tarkasias is important
Speaker 2: for the adjudication process, is as the overturning of Chevron
Speaker 2: was for the rule making process. This is the other
Speaker 2: half of agency's formal powers. So in this case, let
Speaker 2: me go into a little bit of the kind of
Speaker 2: factual background. At least according to the ALJS, is found
Speaker 2: by the SEC. Darkasey had claimed to brokers and investors
Speaker 2: that some prominent accounting firm would audit the hedge fund,
Speaker 2: that some prominent investment bank would serve as the fund
Speaker 2: primary broker, and that half the funds would be invested
Speaker 2: in life insurance policies. The LJ found that no audit
Speaker 2: had taken place, no prime vocage account was open, and
Speaker 2: only twenty percent was invested, and so he The ALJ
Speaker 2: and the SEC found that Jarkisey had committed securities fraud.
Speaker 2: Now I don't know if these facts are true or false,
Speaker 2: and there was no jury involved in this, despite the
Speaker 2: fact that Darkasey had asked for one. The Fifth Circuit
Speaker 2: reviewed the findings of the SEC and LJ and they
Speaker 2: found that there were three problems with the process that
Speaker 2: the SEC went through. Specifically, that the SEC had the
Speaker 2: discretion to bring the case either within federal court or
Speaker 2: with through his administrative process, but that there was no
Speaker 2: intelligible principle telling the SEC which one it should go for,
Speaker 2: and so it violated the non delegation doctrine for the
Speaker 2: SEC to make that choice without being told by Congress
Speaker 2: how it should be making that choice. The second problem
Speaker 2: was that there was a four cause restriction on the
Speaker 2: administrative law judges removal that violated Article two in the
Speaker 2: Separation of Powers. And lastly, that Jarghesi was entitled to
Speaker 2: a jury trial on the Seventh Amendment. Now, the Supreme
Speaker 2: Court only decided that third question specifically on the Seventh
Speaker 2: Amendment and left the other two to go back to
Speaker 2: the Fifth Circuit in the future cases. So those two
Speaker 2: are still live issues in future cases. But because the
Speaker 2: Supreme Court was able to resolve it entirely on the
Speaker 2: Seventh Amendment rouds that is then entire basis for the
Speaker 2: Supreme Court's opinion, So I'm going to be focusing on
Speaker 2: that aspect of it here. So the Seventh Amendment says,
Speaker 2: in suits a common law, where the value and controversy
Speaker 2: shall exceed twenty dollars, the right of trial by jury
Speaker 2: shall be preserved. So the key question then in this
Speaker 2: case is what is a suit at common law? According
Speaker 2: to the sec any administrative action brought in its administrative
Speaker 2: forum is not a suited common law because a suited
Speaker 2: common law meant an in federal court. If you don't
Speaker 2: go to court, it's not a suit, and therefore it
Speaker 2: doesn't matter. Under the Seventh Amendment. We don't need a
Speaker 2: jury as long as we don't bringing it outside of
Speaker 2: an Article three court. Now, there's some problems with this.
Speaker 2: If that were actually the case, then Congress could effectively
Speaker 2: eliminate the Seventh Amendment right and just assign everything to
Speaker 2: administrative forums or outside courts and just eliminate the right
Speaker 2: to a by jury in all actions. And that seems
Speaker 2: rather absurd given the history of the Seventh Amendment. The
Speaker 2: Seventh Amendment was created in response to certain abuses by
Speaker 2: the English government that occurred shortly before the American Revolution.
Speaker 2: There was a lot of restrictions on trading, specifically that
Speaker 2: certain goods and ships had to go through Everything had
Speaker 2: to go through England, had to be bought and sold
Speaker 2: certain goods through England before it could come to or
Speaker 2: be sold by the American colonies. This caused prices to
Speaker 2: go up a lot more than if they had sold
Speaker 2: directly to foreign governments or foreign individuals, and there was
Speaker 2: a lot of Americans were upset by that, and because
Speaker 2: of that, there was a lot of Americans that committed
Speaker 2: smuggling and kind of avoided those restrictions. The British government
Speaker 2: then brought smuggling charges against American colonists, and the American
Speaker 2: colonists who sat on juries were rather hesitant to convict
Speaker 2: their fellow American colonists of these crimes. They were very
Speaker 2: skeptical and kind of really pushed back against a lot
Speaker 2: of the extravagance and a lot of the prosecutions. And
Speaker 2: there was a lot of complaints by the British governors
Speaker 2: that were selected by the English authorities about this. So
Speaker 2: what the English Parliament decided to do is transfer all
Speaker 2: of these from common law courts to admiralty courts that
Speaker 2: had no jury trials and therefore bypassed the right to
Speaker 2: a jury and just have individuals that were selected by
Speaker 2: the British government deciding if these people were guilty in
Speaker 2: issuing fines. That was the history that then led to
Speaker 2: the Seventh Amendment that protected these kind of actions and
Speaker 2: ensured that a jury trial would be allowed. Now it
Speaker 2: does say ensues a common law to the founding, there
Speaker 2: was kind of three different areas of law where different
Speaker 2: cases could be brought. You could bring cases in the
Speaker 2: common law courts, the courts of equality, equity, and the
Speaker 2: courts of animalty. The animalty courts are for things that
Speaker 2: occur on the high seas. There's a natural reason to
Speaker 2: not have a jury in these cases because the actions
Speaker 2: occur to the high seas. There is no local jury
Speaker 2: in the middle of the ocean that you can then
Speaker 2: call forth to being to decide issues of fact. Issues
Speaker 2: of equity was another exception that is distinguished from court
Speaker 2: from common law courts. In these cases, you're not trying
Speaker 2: to punish anyone. You're not taking property from them that
Speaker 2: they own because they committed some wrongdoing. Instead, you're saying
Speaker 2: what needs to happen in the future to follow the law,
Speaker 2: and you're trying to set things right because you're not
Speaker 2: actually punishing anyone, and there's no decision as to some
Speaker 2: bad act that occurred in the past. The ability for
Speaker 2: the government to kind of abuse that process even without
Speaker 2: a jury is a lot less because any decisions made
Speaker 2: would not generally apply just to the individuals involved, but
Speaker 2: would then be applicable to anyone in society under equal facts.
Speaker 2: And so in those cases ad Multy and Equity, the
Speaker 2: founders not believe that a jury was required, but they
Speaker 2: did want to preserve it as suits of common law.
Speaker 2: Now suits at common law only meant cases brought in court.
Speaker 2: It can be easily evaded. Instead, at least my opinion
Speaker 2: is that suits of common law meant suits that at
Speaker 2: that time would have been brought in common law, meaning
Speaker 2: that there are suits for damages or to remedy past
Speaker 2: harms by taking property that they that people had and
Speaker 2: giving it to those that were harmed, or to the government.
Speaker 2: Any of these kind of cases or suits at common law,
Speaker 2: and those kinds of cases we need to have a
Speaker 2: jury trial, and that's mostly what the majority held in
Speaker 2: this case. One of the key problems is that there
Speaker 2: are some cases what's called public rights cases, where there
Speaker 2: was no jury involved in the process. Now, a lot
Speaker 2: of these are cases where even I would not characterize
Speaker 2: them as suit as a common law, although they might
Speaker 2: involve money. An example might be a federal benefit program.
Speaker 2: The government is handing out money, and it's not taking
Speaker 2: money from people that is properly their The adjudication of
Speaker 2: that is not a suit at common law. There's no
Speaker 2: punishment involved in making such a decision, and sol though
Speaker 2: it involves money, it can be done outside of the
Speaker 2: jury process. There's a variety of other areas that the
Speaker 2: court identifies, such as certain immigration law, some tax law.
Speaker 2: For instance, some tax collector is taking money in for
Speaker 2: the government, and although they take the money into the government,
Speaker 2: they then fail to pass it along to the treasury.
Speaker 2: The government can go and say, look, you use that
Speaker 2: money to buy the house. We're now going to sell
Speaker 2: that house and collect the money that is properly are
Speaker 2: as the government. We're not just punishing you because of this,
Speaker 2: We're just trying to take the money that the government
Speaker 2: already owns. This is our money. And so in those
Speaker 2: kind of what's called public rights cases. No jury needed
Speaker 2: to be involved, and those all started perfectly acceptable. You know,
Speaker 2: some of these public benefits, some tax cases, stuff like that.
Speaker 2: There were several of these kinds of cases. The problem
Speaker 2: is that in the nineteen seventy seven case of Atlas Roofing,
Speaker 2: the Supreme Court expanded that public rights doctrine to include
Speaker 2: not just those kind of traditional areas where most people
Speaker 2: would say that's not a lawsuit at common law, but
Speaker 2: tried to then claim that any time the government is
Speaker 2: exercising sovereign power related to a federal statute that gives
Speaker 2: the government that power, that it automatically then becomes a
Speaker 2: public right, and therefore the government can bypass the jury
Speaker 2: trial right. I actually filed a brief in darkase and
Speaker 2: asked the Supreme Court to overrule Atlas Roofing. The majority
Speaker 2: declined to do so. Instead, what they decided to do
Speaker 2: is distinguish Atlass Roofing and say that the Osha Act
Speaker 2: did not involve the kind of traditional common law actions
Speaker 2: like involved in this case. In this case, which involved
Speaker 2: securities fraud, the court found it was very similar to
Speaker 2: common law fraud that would have been brought in a
Speaker 2: common law court at the founding and therefore was clearly
Speaker 2: a suit at common law at the time of the founding,
Speaker 2: and then distinguished the Osha Act and said, that's an
Speaker 2: entirely separate scheme. It was unrelated to a lot of
Speaker 2: things that occurred at the founding, and therefore we don't
Speaker 2: need to deal with that, this roofing and this constitutionality
Speaker 2: right now. Instead, it relied upon two cases Toll the
Speaker 2: United States and Grand Faresea bian Norberg. This was in
Speaker 2: nineteen eighty seven. In nineteen eighty nine, case Told dealt
Speaker 2: with the Clean Water Act and a bind that was issued.
Speaker 2: The court there said a bine under the Cleaning Water
Speaker 2: Act was very similar to an action in debt at
Speaker 2: common law and therefore would fall within the Seventh Amendment.
Speaker 2: And in Grand Faresea, the court said that a fraudulent
Speaker 2: and conveyance actions are legal in nature sure and require
Speaker 2: a jury trial. So it was those cases that the
Speaker 2: majority primarily relied upon to say that a securities fraud
Speaker 2: case is similar enough to assuit a common law that
Speaker 2: it needs to have a jury trial to be able
Speaker 2: to be functional, and this and often will push the
Speaker 2: case out of administrative forum because administrative forums don't have
Speaker 2: jury trials. The ability to bring these cases in administrative
Speaker 2: and forum is going to be limited. Instead, a lot
Speaker 2: of these cases are going to then be brought in
Speaker 2: Article three courts where they can have jury trials. And
Speaker 2: these cases really should be an Article three court, so
Speaker 2: you have a real jury that is going sorry, a
Speaker 2: real judge that can evaluate these under Article three as
Speaker 2: well as a jury. I think both of those are true.
Speaker 2: Although this case focused specifically on the right to a
Speaker 2: jury trial, now, the dissent primarily focuses on the fact
Speaker 2: that although the Court distinguished at List Roofing, according to
Speaker 2: this assent, it shouldn't have that Atlas Roofine really controlled
Speaker 2: this case. That this case. While the majority said that
Speaker 2: the remedy at issue issuing a monetary fine is what
Speaker 2: causes this to require a jury trial under the Seventh Amendment,
Speaker 2: the sense said, look, Atlas Roufine had a fine just
Speaker 2: like this one. And it said that the security and
Speaker 2: the Descent claims that the securities fraud statue is the
Speaker 2: creation of a new statute, not the same as the
Speaker 2: common law fraud because it doesn't require any kind of
Speaker 2: injury to private parties. It is brought by the government
Speaker 2: in its sovereign capacity and directly by the government. It's
Speaker 2: not a litigation between two private parties. Now I have
Speaker 2: some you know, I can see that as sense point.
Speaker 2: In some ways, I agree that this is not that
Speaker 2: much different between Atlas Roofine. This is why we asked
Speaker 2: that Alice Roufing be overruled. We think that Lias Rufe
Speaker 2: is wrong to decide that the Supreme Court was kind
Speaker 2: of careful not to say whether Atlas Ruvine was rightly decided.
Speaker 2: In fact, they suggested, and that Alice Ruvie may already
Speaker 2: have been overturned, but they don't actually decide that here,
Speaker 2: which is kind of strange. Usually the Court is clear
Speaker 2: what cases are good law and what cases are it's
Speaker 2: not good law when it's citing those cases. But the
Speaker 2: Descent also takes issue with the fact that the majority
Speaker 2: is kind of making that kind of distinction where it says,
Speaker 2: we're going to distinguish Atlas Rufine, but we're not going
Speaker 2: to say if Atless Rufine is good law. So I
Speaker 2: can understand why the Ascent is making those claims. I
Speaker 2: would just say that even if the Ascent is right,
Speaker 2: I think the Court should have overruled at this Rufie.
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