SEC v. Jarkesy Put the Jury Back Between Citizens and Agency Courts

In 1776 the colonists put a grievance in the Declaration of Independence against the Crown that reads, in part, "For depriving us in many cases, of the benefits of Trial by Jury." Two hundred and forty-eight years later, a federal agency was still depriving Americans of that benefit, and it took a hedge fund manager, a federal appeals court and six justices of the Supreme Court to remind it.

The case is SEC v. Jarkesy, decided on June 27, 2024. It is one of the most consequential decisions about the administrative state in a generation, and the reason is not complicated. For decades, an agency that wanted to punish you could do it in a hearing room that it ran, before a judge it employed, under rules it wrote. The Court held that when the government seeks to punish a person for fraud, the Constitution requires a jury. I want to tell the story of this case from the beginning, because it is the clearest recent example of what the Founders meant when they wrote the Bill of Rights.

The Text

The Seventh Amendment, ratified in 1791 as part of the Bill of Rights, reads in full:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

The amendment exists because of a fight. When the Constitution came out of Philadelphia in 1787, it guaranteed jury trial in criminal cases in Article III, but it said nothing about civil cases. The omission was one of the Anti-Federalists' favorite complaints. They argued that a government that could try civil disputes without a jury would be a government that could take property without the consent of the neighbors of the man whose property was taken. The Federalists replied that a general guarantee was impractical because the states' civil practices differed. The people were not persuaded, and the first Congress answered them with the Seventh Amendment.

That history is the key to the case. The jury in civil matters is not a technicality. It is one of the conditions on which the Constitution was ratified.

The Facts

George Jarkesy ran hedge funds. Patriot28, LLC served as the investment adviser to his funds. In 2013, the Securities and Exchange Commission began an enforcement proceeding against Jarkesy and his advisory firm, alleging that they had committed fraud in violation of the securities laws. The alleged misrepresentations concerned the funds' investment strategies, the identities of their auditor and their prime broker, and the valuation of the funds' assets and the fees charged.

Here is the detail that matters. The SEC did not take the case to a federal court. It brought the case before one of its own administrative law judges. The agency had that choice because of the Dodd-Frank Act of 2010, which gave the SEC authority to seek civil penalties in its own in-house proceedings in cases that, for people who were not registered with the agency, it had previously had to bring in federal court. The SEC had a menu, and it chose the item on which it was both the prosecutor and the host of the trial.

The administrative law judge ruled against Jarkesy. The full Commission reviewed the case and agreed, and in 2020 it imposed a civil penalty of $300,000, ordered him to cease and desist from further violations, and ordered the firm to disgorge profits, among other relief.

Jarkesy petitioned for review in the Fifth Circuit. In 2022 a panel of that court vacated the ruling, on three constitutional grounds. The Seventh Amendment gave him a right to a jury. Congress had given the SEC a legislative power, by letting it choose between the in-house forum and a federal court without any guidance, in violation of the nondelegation doctrine. And the protections that shielded the agency's administrative law judges from removal by the President were unconstitutional. The government went to the Supreme Court.

The Question and the Holding

The Chief Justice began his opinion for the Court with a statement of the question. The Seventh Amendment guarantees a right to a jury "in Suits at common law." The SEC was seeking civil penalties for securities fraud. The question presented, Chief Justice Roberts wrote, was whether the Seventh Amendment entitles the defendant to a jury trial, and he answered it in two words: "It does."

The vote was six to three. The Chief Justice was joined by Justices Thomas, Alito, Gorsuch, Kavanaugh and Barrett. Justice Gorsuch wrote a separate concurring opinion, joined by Justice Thomas, on the history of the jury. Justice Sotomayor dissented, joined by Justices Kagan and Jackson. The majority did not reach the nondelegation and removal questions that the Fifth Circuit had decided.

The Reasoning, Step by Step

The opinion is clear, and it rests on a short chain of steps. Let me set it out in order.

1. The Seventh Amendment covers more than the suits known in 1791. The phrase "Suits at common law" refers to suits in which legal rights are decided, as opposed to the equitable ones in which a court of chancery gave other kinds of relief. It is not limited to the precise forms of action that existed at the Founding. In Granfinanciera, S.A. v. Nordberg (1989) and Tull v. United States (1987), the Court had already held that statutory claims can be "legal" in nature.
2. A civil penalty is the mark of a legal claim. In the Court's view, the remedy is the most important consideration. Civil penalties are designed to punish and deter, and not to compensate. Money damages meant to punish are the traditional remedy of courts of law. The Court cited Tull, which had held that a claim for civil penalties under the Clean Water Act carried a right to a jury.
3. The SEC's claims resembled common-law fraud. The statutory provisions the SEC invoked, the antifraud provisions of the securities laws, address misrepresentations of the kind the common law has long recognized as fraud. The Court found that they closely track common-law fraud, so the claims were legal in nature.
4. The "public rights" exception did not apply. Congress may assign some matters to agencies without a jury, because they involve "public rights," a category the Court has traced to Murray's Lessee v. Hoboken Land & Improvement Co. (1856). The government argued that the SEC's enforcement fell within that category, relying on Atlas Roofing Co. v. Occupational Safety and Health Review Commission (1977), which had upheld in-house penalties under the Occupational Safety and Health Act. The Court distinguished Atlas Roofing. That case involved a new statutory duty, workplace safety, with no common-law counterpart, and Congress had created the remedy for it. Fraud is different. It is an old common-law wrong, and the government cannot dodge the jury by transferring an old wrong to a new forum. The Court held that the substance of the claim, not the forum or the label, decides the question, and that the government's being the plaintiff did not change the analysis.

That final step is the heart of the case. The test is not who brings the action, or what building the hearing is held in. It is what kind of claim it is.

The Dissent

Justice Sotomayor's dissent, which Justices Kagan and Jackson joined, is a serious opinion, and it deserves a fair summary. Its argument was that the majority had broken with precedent. In the dissent's view, Atlas Roofing controlled the case: when Congress creates a new statutory claim, enforced by a government agency, in the interest of the public, it may assign the claim to an agency without a jury, and the securities laws fit that description. The dissent also pointed to the long history of agency adjudication and warned that the decision would call into question the structure of administrative enforcement across the government. It argued that the Court had no principled line to separate the statutory fraud claim before it from the many other claims that agencies adjudicate.

I think the dissent's reading is wrong, and the reasons follow. But the dissent's warning is also, in a sense, the best argument for the majority. If it is true that the government now relies on in-house tribunals to adjudicate penalties in a vast range of fields, that is not a reason to uphold the practice. It is a measure of how far we have drifted from the text.

Answering the Strongest Objection

Here is the objection at its strongest: juries are slow, expensive and unqualified to judge the technical questions of a modern securities case. An administrative law judge is an expert who handles hundreds of these cases and knows the law. Replacing the expert with twelve laypeople will lower the quality of justice, raise its cost and let wrongdoers escape.

That is a fair statement, and here is the answer, in four numbered parts.

1. The Founders weighed it and chose the jury. They knew that juries were less efficient than judges. They knew that the Crown's judges were learned, and that colonial juries sometimes refused to convict in the face of what the Crown regarded as plain law. That was the point. A jury is a deliberate inefficiency, set in the path of the government, so that a penalty cannot be imposed without the agreement of ordinary people.
2. Expertise is a reason for assistance, not for substitution. Courts handle patent suits, antitrust suits and complex fraud trials, and the parties explain the technical matter with experts and exhibits. The system has dealt with complexity for centuries without abolishing the jury.
3. The structure of the tribunal matters. In an agency proceeding, the same agency brings the charge, investigates the case, employs the judge, and, on appeal, reviews the judge's decision. A defendant who loses has no one outside the agency to appeal to until the case reaches a court. That is the combination of functions that Roscoe Pound warned about in 1938, which I describe in Roscoe Pound Warned the Bar About Administrative Absolutism in 1938. The jury interrupts that circuit.
4. The record backs the worry. The agency gets to pick its forum. Whatever the reason, a government that can choose the court it thinks it will win in is a government that has gained an advantage the Constitution did not authorize.

Madison put the principle in Federalist 47: the accumulation of all powers in the same hands is the "very definition of tyranny." The jury is a mechanism for dispersing one of those powers, the power to judge, to the people. See Federalist 47 Defines Tyranny as All Powers Gathered Into the Same Hands.

The Cases Before and After

Jarkesy did not appear from nowhere. It is the third of a line of recent cases in which the Court has restricted the way agencies adjudicate.

Lucia v. SEC (2018). The Court held that the SEC's administrative law judges are "Officers of the United States," so their appointment must comply with the Appointments Clause of Article II. The Commission had treated them as employees and let its staff hire them. The Court held that such an officer must be appointed by the President, the courts of law or the heads of departments, and it ordered a new hearing before a different judge. Justice Kagan wrote for the Court.

Axon Enterprise, Inc. v. FTC (2023). The Court held that a person facing an agency enforcement proceeding may go to federal district court to challenge the constitutionality of the agency's structure, without waiting for the proceeding to end. It decided Axon together with a companion case involving the SEC. Before Axon, a defendant was typically told to endure the entire in-house process first, and to raise the constitutional objection afterward on review. The cost of that route was the process itself.

SEC v. Jarkesy (2024). The Court held that the Seventh Amendment's jury right applies when the SEC seeks civil penalties for fraud.

Taken together, the three cases follow a logic. Lucia asked who may appoint the judge. Axon asked when a citizen may object to the forum. Jarkesy asked whether the forum may be used at all.

What It Means for Other Agencies

I want to be careful here, because it is tempting to claim more than the case holds. It does not abolish administrative adjudication. It does not apply to every agency proceeding. The Court's reasoning depends on three things: a claim for civil penalties, a claim of the kind that the common law recognized, and the absence of a historic public-rights category. Where an agency decides whether someone qualifies for a benefit, a license or a tariff classification, the reasoning is different, and the public-rights tradition covers a good deal.

What the case does do is threaten the practice of using in-house tribunals to impose penalties for wrongs that look like old common-law wrongs. Many agencies have the power to impose civil penalties through their own tribunals, and the question of how far Jarkesy reaches into those schemes is the subject of continuing litigation. When you read about one, ask the three questions: is the agency seeking a penalty meant to punish, is the wrong of a kind the common law knew, and is the matter one of the traditional public-rights categories?

The case also left open the removal question the Fifth Circuit had decided. Whether the officials who preside at these hearings may be shielded from the President's control is a separate problem, related to the one in Humphrey's Executor Created a Fourth Branch the Constitution Never Mentions, and it remains a live issue.

What This Means to a Family

A reader might ask what a securities case has to do with ordinary families. It matters in three ways. First, the principle that a person accused of a wrong that carries a punishment is entitled to a jury is a principle that protects everyone, not only hedge fund managers. Second, the practice of adjudication by agencies reaches small businesses, farmers, retirees and professionals, many of whom cannot afford a battle on two fronts. Third, the case restores a barrier that the Founders built and that the administrative state had walked around. A citizen who faces the government's power to punish should be able to say: "I demand a jury of my neighbors."

The Case in Brief

1. The Seventh Amendment guarantees a jury in "Suits at common law," and the Anti-Federalists' complaint about its absence from the original Constitution is why it exists.
2. In SEC v. Jarkesy, decided June 27, 2024, the Court held six to three that when the SEC seeks civil penalties for securities fraud, the defendant has a right to a jury.
3. The Chief Justice's reasoning turned on the remedy, a penalty meant to punish, and on the nature of the claim, which resembles common-law fraud, so the public-rights exception and Atlas Roofing (1977) did not apply.
4. Justice Sotomayor's dissent warned of disruption to agency adjudication, but disruption is the price of restoring a limit that had eroded.
5. Together with Lucia v. SEC (2018) and Axon v. FTC (2023), the case sets limits on how agencies appoint judges, when citizens can object and whether the forum can be used at all.

What you can do: read the Seventh Amendment and find out which agencies can fine you through an in-house tribunal, then ask your representative through the House and Senate directory whether Congress should require a federal court and a jury for penalties that look like old common-law wrongs.