The Supreme Court hobbled the power of the SEC today. But what about everyone else?

The Supreme Court has decided to leave their two biggest cases for the last day of the term. Apparently they want to drop them Friday morning and then get the hell out of Dodge. I'm not quite sure what that means.

But in the category of big-but-not-world-shaking decisions, today they published their opinion in Securities and Exchange Commission v. Jarkesy. The question at stake was whether the SEC could try Mr. Jarkesy before an internal administrative law judge. Or, per the Seventh Amendment, were they required to try him in a normal federal court? The Court's conservatives ruled that the SEC was out of line and Jarkesy had the right to an ordinary jury trial.

Ian Millhiser has the right take on this. If you were starting from scratch, you could make a case either way. The Seventh Amendment guarantees a jury trial in civil cases brought under common law, so the question is whether federal regulations count as common law. If it were 1850 and you were addressing this for the first time, it would be plausible to conclude that any trial for money damages in a traditional sort of case is common law-ish and therefore has to be done in front of a jury.

As it happens, though, the Supreme Court ruled the other way a long time ago and then continued to rule the other way for the next 150 years. During that time, Congress has made many, many laws that rely on the constitutionality of administrative law courts:

Had Congress known a century ago that the Supreme Court would someday eliminate its ability to assign certain cases to ALJs, it could have written hundreds of statutes differently so that they would be enforced in jury trials. It also could have appropriated sufficient money to federal agencies to allow them to hire trial counsel who could bring proceedings in federal district courts.

But Congress has instead operated for many decades under the assumption that cases like Atlas Roofing are good law. And now the Supreme Court has pulled the rug out from under a multitude of federal statutes.

Jarkesy went down on a straight party-line vote, 6-3. It's a bellwether of the current Court's hostility to agency power and bodes ill for their decision tomorrow in Chevron. It's also a sign of their disdain for precedent. You think Dobbs broke precedent? The SEC has been legally trying fraud cases for nearly a century.

As for the impact of the law, who knows? The Court ruled that Jarkesy "implicates the Seventh Amendment because the SEC’s antifraud provisions replicate common law fraud." So maybe the decision applies only to fraud cases?

On the other hand, the ruling also says it depends primarily on the remedy in the case, namely a fine. "The remedy is all but dispositive. For respondents’ alleged fraud, the SEC seeks civil penalties, a form of monetary relief.... SEC civil penalties are thus ‘a type of remedy at common law that could only be enforced in courts of law.’” This suggests it applies to any case that assesses monetary penalties.

On the third hand, the Court specifically says its ruling only applies to offenses that are old and well known. Fraud, for example. But in the case of offenses that are brand new and were never known to the common law—for example, unsafe working conditions as described in modern statutes—administrative courts are fine.

So what now? This is yet another case in which the Court has essentially punted by ruling so narrowly that it's very difficult to figure out just how much impact it will have. Is every administrative law court now out of business? There are dozens of them and they hear thousands of cases a year, so that would be catastrophic. The answer, as always, is that eventually someone will sue a different agency that's applying a different law, and the Court will nudge things one way or the other. In the meantime, I imagine that administrative law courts everywhere but the SEC and for all offenses other than fraud will continue operating and hoping for the best.