The United States Supreme Court continues to reaffirm and return to the founding principles ingrained within the Constitution. In recent days, that reaffirmation has occurred within the area of administrative law, where the Court’s decisions have invigorated the doctrine of separation of powers and strengthened the liberty protections of the jury trial.

In what may be the most far-reaching decision of this term, the Court in Loper Bright Enterprises v. Raimondo struck down the Chevron doctrine, which has required courts to defer to an administrative agency’s interpretations of ambiguous federal statutes for forty years. To its widespread critics, Chevron deference violated the separation of powers scheme by giving the executive branch the power to interpret congressional statutes. The Court’s overruling of Chevron now removes this interpretive power from the administrative state and returns it to the judiciary.

The day before the Court announced Loper, it handed down another administrative law decision that likewise restricted a vast power that had been acquired by the administrative state. In SEC v. Jarkesy, the Court restored the Seventh Amendment jury trial right to defendants against whom the Securities Exchange Commission seeks civil penalties for securities fraud. 

Jarkesy involved two investment funds launched by George Jarkesy between 2007 and 2010. The SEC charged Jarkesy with violating the antifraud provisions contained in three congressional statutes passed in the wake of the Great Depression: the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. The Dodd-Frank Act of 2010 then conferred on the SEC the ability to enforce the civil penalty provisions of these Acts through in-house proceedings before an administrative law judge. Relying on Dodd-Frank, the SEC brought such an action against Jarkesy. This juryless action, according to the Court, violated the Seventh Amendment’s right to a jury trial in an Article III court.

The Seventh Amendment preserves the right to a jury trial for all actions at common law. Even though the SEC was seeking to enforce statutory antifraud provisions, the Court, in an opinion authored by Chief Justice Roberts, ruled that those provisions replicated common law fraud and hence warranted a jury trial. According to the Court, the SEC action targeted the same basic conduct as common law fraud and used the same legal principles. Consequently, Congress could not remove such cases from the jurisdiction of the federal judiciary. 

The Court stated that the mere labeling of the fraud claims as “statutory” was irrelevant to the determination of whether they were common law in nature. Courts must look to the substance of an action, not to whether the action originated in some regulatory scheme: “Congress cannot conjure away the Seventh Amendment by mandating that traditional legal claims be taken to an administrative tribunal.” And the substance of an action depended on, among other things, the type of remedy sought—with money damages being the prototypical common law remedy—and whether Congress drew upon the common law in the drafting of its antifraud statutory provisions. Quoting Justice Joseph Story, the Court broadly defined common law claims as embracing all claims not of equity or admiralty jurisdiction.

After finding that the statutory antifraud provisions involved traditional legal or common law claims, the Court held that the “public rights” exception to Article III jurisdiction did not apply. This exception allows Congress to assign certain adjudicatory actions to administrative agencies operating without a jury. The “public rights” exception involves matters historically determined by either the executive or legislative branches, such as the imposition of tariffs, or the enforcement of immigration restrictions against private transportation companies.

The concurring opinion written by Justice Gorsuch and joined by Justice Thomas presented an even stronger case against the SEC’s use of juryless in-house tribunals to assess civil penalties. According to Gorsuch, such tribunals also violate other procedural protections found in Article III and the Fifth Amendment Due Process Clause. In explaining how the use of Dodd-Frank to conduct in-house adjudications prejudiced defendants, Gorsuch cited a study concluding that subsequent to Dodd-Frank the SEC had prevailed in 90 percent of its in-house actions, compared with a 69 percent success rate in court cases.

The majority’s dismissal of the “public rights” exception prompted a strong opposition from the dissent, which argued in favor of government power and efficiency. As Justice Sotomayer wrote in a dissent joined by Justices Kagan and Jackson, the power of agencies to conduct juryless, in-house adjudications has a well-established history and fosters government efficiency. Reversing this practice would threaten administrative chaos and regulatory breakdown.

Whereas the dissent adopted a functional approach focusing on government efficiency, Roberts argued in his majority opinion that “practicalities” could not undermine the vitality of the jury right. With respect to determining the “public rights” exception, the presumption must be in favor of Article III courts, wrote Roberts. Courts should narrowly apply that exception, lest “the exception swallow the rule.” 

Many of the dissent’s arguments focused on the meaning and application of the “public rights” exception. The dissent disagreed with the Court’s more narrow characterization of “public rights” as involving such matters as revenue collection, customs and immigration law, relations with indigenous tribes, and administration of public lands. According to the dissent, courts in the past had more generously applied the “public rights” exception: “The practice of assigning Government’s right to civil penalties for statutory violations to non-Article III tribunals is so settled that it has become an undisputed reality of how our Government has actually worked.”

The dissent called the Court’s decision “a massive sea change” and “a power grab” on the part of the judiciary. Uncharacteristic of liberal justices of the past, the dissent cited separation of powers concerns and even quoted President George Washington. More uncharacteristically, the dissent revived Scalia-like arguments for judicial restraint while ignoring the liberal adulation of the Warren Court’s individual rights activism, labeling as “misguided” the Jarkesy majority’s apparent belief that “courts can alone be safely intrusted with power.”

Indeed, the dissent’s downgrading of jury rights and its trust in agency bureaucrats to protect individual liberty would probably confound if not shock the Warren Court’s liberal justices, who waged a due process and individual rights revolution through their judicial activism. In an almost direct affront to the Warren legacy, the Jarkesy dissent wrote: “By giving respondents a jury trial … the majority may think that it is protecting liberty … [but] that belief, too, is misguided.” In other words, liberty is better protected by federal government agencies—entities that combine in-house the functions of investigation, prosecution, and then adjudication of claims against individual citizens—than by juries in federal courts.

Aside from the debate about the “public rights” exception, differing attitudes about the jury trial right may explain the fundamental conflict between the dissent and majority in Jarkesy. The dissent does not even address the jury trial right as a longstanding bulwark for liberty nor the history of its role in the US constitutional system. On the other hand, the majority opinion stresses the importance of this right and its hallowed role in the movement for independence from England and later in America’s constitutional development. The practice by the English government of moving legal cases to admiralty or chancery courts, where there was no jury, helped coalesce the American colonies in their fight for independence. Asserting the importance of the Seventh Amendment jury trial right, the Court stated that ever since ratification of that Amendment every encroachment on the jury right “has been watched with great jealousy.”

Jarkesy can also be viewed in an even broader context of judicial reassertion of constitutional control over the administrative state. In the 1930s, to accommodate the aims of the New Deal, the Court relaxed many constitutional restraints on the growth and power of the administrative state. Consequently, courts came to defer greatly to congressional delegations of power, as well as to administrative exercises of power. The current Court, however, as indicated in both the Loper and Jarkesy decisions, appears determined to restore a sense of constitutional balance that was lost in the aftermath of the New Deal constitutional revolution. To effectuate this determination, the Court may have to overturn precedents that conservative and libertarian jurists have long contended are constitutionally suspect.

This return to constitutional principles will inevitably elicit great outrage from the liberal establishment. But outrage is often the first outgrowth of hypocrisy, as evidenced by the dissent’s separation of powers claim that the majority’s decision “offends the Framers’ constitutional design so critical to the preservation of individual liberty.” For nearly a century, liberal jurists and scholars have belittled similar conservative and libertarian arguments in defense of separation of powers. Indeed, the modern administrative state rests on a dismissal of separation of powers principles.