Supreme Court Scrutinizes Yet Another Federal Regulatory Abuse

Posted on Monday, December 11, 2023
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by Outside Contributor
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“Judge, jury and executioner.”  

That familiar, ominous idiom instantly signals the sort of unchecked, centralized authority that threatens individual freedom and violates our Constitution’s system of limited government and separation of powers.  

In recent years, it particularly captures the growing menace of the nation’s federal regulatory state.  

Unable to enact extremist agenda items such as “Net Neutrality” or the “Green New Deal” via the democratic representative process, the political left that populates our sprawling administrative agencies instead seeks to impose its will through regulation.  

That egregiously violates our constitutional system. Our executive branch and its federal agencies exist to execute our nation’s laws, not create them or abusively interpret them.  

Fortunately, in recent years the United States Supreme Court has undertaken a concerted effort to interrupt the regulatory state’s overreach, including the monumental West Virginia v. EPA rebuke in 2022:  

Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible “solution to the crisis of the day.” But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d). A decision of such magnitude and consequent rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.  

This term, the Court will address a similarly defective Security and Exchange Commission (SEC) procedure empowering itself to serve as the proverbial judge, jury and executioner in its proceedings.  

At issue in SEC v. Jarkesy is a commission enforcement procedure created in the wake of the 2010 Dodd-Frank Act, which has earned myriad other judicial rebukes.  Specifically, the SEC created a system by which it could prosecute alleged securities law violations through its own internal administrative hearings before its own judges rather than court jury trials, which defendant George Jarkesy claims violates his Seventh Amendment right to a jury trial.  

The Fifth Circuit Court of Appeals agreed on all counts, and it’s easy to understand why.  

Most egregiously, the administrative law judges who conduct in-house hearings are appointed by the very same SEC commissioners who authorize those prosecutions.  As defendant Jarkesy’s brief notes, “SEC prosecutors and ALJs, who presumably have lunch together in the cafeteria at the SEC, cannot both prosecute and adjudicate the fact of liability in a case like that of respondents, regardless of the criteria for making that supposed choice.”  

Aggravating the unfairness, internal trials allow wider use of hearsay and documentary evidence that wouldn’t be admitted into evidence in court trials, and defendants’ right to discovery is much more limited. It’s therefore no wonder that at the time of Mr. Jarkesy’s trial, the SEC maintained a 100% victory rate on internal hearings, as opposed to its 61% success rate in judicial branch trials.  

Moreover, as Jarkesy’s brief further notes, an SEC data breach allowed its enforcement officers to obtain privileged legal memos in his case and multiple others, deepening the flagrant unfairness and lack of due process.  

After the SEC predictably ruled against Jarkesy, the Fifth Circuit vacated that decision on all counts because of its constitutionally defective structure:  

It often acts as both prosecutor and judge, and its decisions have broad consequences for personal liberty and property.  But the Constitution constrains the SEC’s powers by protecting individual rights and the prerogatives of the other branches of government. …  

In sum, we agree with Petitioners that the SEC proceedings below were unconstitutional. The SEC’s judgment should be vacated for at least two reasons:  (1)  Petitioners were deprived of their Seventh Amendment right to a civil jury;  and (2)  Congress unconstitutionally delegated legislative power to the SEC by failing to give the SEC an intelligible principle by which to exercise the delegated power.  

That assessment characterizes all too many contemporary federal agency abuses, and the Supreme Court should affirm the Fifth Circuit’s ruling and further reclaim Americans’ constitutional freedoms against regulatory overreach.  

In the Declaration of Independence, after all, our Founding Fathers specifically listed Britain’s denial of “the benefits of trial by jury” as a motivating grievance. That protection of individual freedom remains as important today as it was then, and its denial is no less outrageous today than it was then.  

In a better political environment, our nation’s public agencies wouldn’t subject citizens to such fundamental violations of due process. We can at least remain grateful, however, that a Supreme Court featuring a majority of originalists continues to provide a bulwark against such abuses.  

Reprinted with permission from The Center for Individual Freedom by Timothy H. Lee.

URL : https://amac.us/newsline/society/supreme-court-scrutinizes-yet-another-federal-regulatory-abuse/