Bad Day in Court for the Administrative State

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In Jarkesy v. Securities and Exchange Commission, a divided three-judge panel of the Fifth Circuit put a shot across the bow of the administrative state. In an opinion written by Judge Jennifer Walker Elrod, the court ruled against the SEC in a securities fraud enforcement case on several constitutional claims. The full opinion can be found here.

Petitioners raise several constitutional challenges to the SEC enforcement proceedings.1 We agree with Petitioners that the proceedings suffered from three independent constitutional defects: (1) Petitioners were deprived of their constitutional right to a jury trial; (2) Congress unconstitutionally delegated legislative power to the SEC by failing to provide it with an intelligible principle by which to exercise the delegated power; and (3) statutory removal restrictions on SEC ALJs violate Article II.

A nondelegation ruling against the SEC is a big deal, but the actual argument is somewhat more modest.  The claim is that Congress did not articulate an intelligible principle to guide the SEC on whether to bring enforcement actions in Article III courts or through administrative decision-making. Significant, but pretty fixable.

The third constitutional claim is potentially wide-ranging, though also fixable. The court concludes that administrative law judges are officers exercising substantial policy discretion, and thus cannot be regarded as mere inferior officers doubly insulated from presidential removal.

Judge W. Eugene Davis dissented from all three constitutional conclusions.

The post Bad Day in Court for the Administrative State appeared first on Reason.com.


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