May 20th, 2022

US Court of Appeals for the Fifth Circuit Opinions
Jarkesy v. SEC

Docket: 20-61007
Opinion Date: May 18, 2022
Judge: Jennifer Walker Elrod
Areas of Law: Antitrust & Trade Regulation, Constitutional Law

The SEC brought an enforcement action within the agency against Petitioners for securities fraud. An SEC administrative law judge adjudged Petitioners liable and ordered various remedies, and the SEC affirmed on appeal over several constitutional arguments that Petitioners raised.
 
The Fifth Circuit held that (1) the SEC’s in-house adjudication of Petitioners’ case violated their Seventh Amendment right to a jury trial; (2) Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle by which the SEC would exercise the delegated power, in violation of Article I’s vesting of “all” legislative power in Congress; and (3) statutory removal restrictions on SEC ALJs violate the Take Care Clause of Article II.
 
The court reasoned that the Seventh Amendment guarantees Petitioners a jury trial because the SEC’s enforcement action is akin to traditional actions at law to which the jury-trial right attaches. Further, the SEC proceedings at issue suffered from another constitutional infirmity: the statutory removal restrictions for SEC ALJs are unconstitutional.

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