Amicus Brief:​ George R. Jarkesy, Jr., et al. v. U.S. Securities and Exchange Commission

Washington, DC (October 19, 2023) – The Securities and Exchange Commission prosecuted investment professional and syndicated talk-radio host George R. Jarkesy, Jr. in a years-long administrative proceeding rife with constitutional defects. He raised these problems in federal court ahead of time but the U.S. Court of Appeals for the District of Columbia Circuit told him (in a pre-Axon/Cochran setting) that federal courts lacked jurisdiction over his case. So, he was forced to endure the flawed administrative proceeding for years on end, which SEC adjudicated by an Administrative Law Judge (ALJ) who had no constitutional authority to exercise judicial power and who was improperly insulated from removal. Worse yet, the proceeding denied his Seventh Amendment right to a jury trial. The New Civil Liberties Alliance has filed an amicus curiae brief in SEC v. Jarkesy, urging the U.S. Supreme Court to uphold the Fifth Circuit Appeals Court’s ruling overturning this unconstitutional regime.

In 2010, the Dodd-Frank Act unconstitutionally transferred judicial power to SEC by empowering the agency’s ALJs to adjudicate SEC enforcement cases against Americans like Mr. Jarkesy for alleged securities law violations. The Constitution’s text places judicial power only in federal courts. So, SEC’s in-house adjudication scheme violates constitutional separation of powers. SEC’s ALJs also enjoy multiple layers of protection from removal by the President. The Supreme Court clarified in its 2010 Free Enterprise Fund v. Public Co. Accounting Oversight Board decision that multiple layers of removal protection for officers of the U.S. run afoul of the clause in Article II of the Constitution that requires the President to “take Care that the Laws be faithfully executed.”

SEC adjudication further violated Mr. Jarkesy’s Seventh Amendment jury-trial rights as well as the Fifth Amendment’s Due Process Clause, which requires courts of law to adjudicate SEC’s claims. Dodd-Frank empowers SEC to obtain a jury trial by suing in federal court or avoid a jury trial by initiating an administrative proceeding. Enforcement targets, like Jarkesy, do not have a similar option. Hence, the law unfairly deprives them of the same right to demand a jury trial that SEC has—a blatantly discriminatory rule. The U.S. Court of Appeals for the Fifth Circuit correctly recognized all of these claims as blatant constitutional violations in May 2022.

The Jarkesy (Case) Stands Alone

In April, the Supreme Court upheld NCLA client Michelle Cochran’s right to challenge the constitutionality of her ALJ’s removal protections in federal court before undergoing an administrative adjudication. Mr. Jarkesy’s ordeal proves why SEC v. Cochran was correct. Shockingly, SEC has since tried to avoid judicial review of the constitutionality of its proceedings by dismissing dozens of pending administrative proceedings, including Ms. Cochran’s. SEC’s manipulation of federal court dockets leaves Mr. Jarkesy standing alone in seeking a court ruling on these structural constitutional defects affecting hundreds of Americans. It is essential that the U.S. Supreme Court reach all of Mr. Jarkesy’s claims on review and require the SEC to pursue only constitutional judicial court proceedings—with their due process and jury trial protections—in its enforcement actions.

NCLA released the following statements:

“SEC’s in-house adjudication regime has tipped the scales of justice in the agency’s favor through multiple constitutional violations that shift judicial power from courts to agencies. Congress cannot relocate judicial power that is constitutionally vested in courts alone because only courts preserve and protect jury trial rights, due process, unbiased fact-finding, and appellate review in an independent judicial branch of government. The Framers vested judicial power in courts alone—to prevent the Executive Branch from acting as prosecutor, judge and jury.”
— Peggy Little, Senior Litigation Counsel, NCLA

“The Sixth and Seventh Amendments guarantee everyone the right to a jury trial. The SEC should not be permitted to do away with juries in its enforcement proceedings simply because it doesn’t like the verdicts that juries sometimes reach.”
— Richard Samp, Senior Litigation Counsel, NCLA

For more information visit the amicus page here.

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

Download the full document 

Washington, DC (May 18, 2022) – The U.S. Court of Appeals for the Fifth Circuit handed down a major decision today, vacating SEC’s decision in Jarkesy v. SEC and finding that the agency’s in-house adjudication of Mr. Jarkesy violated his constitutional rights. The New Civil Liberties Alliance filed an amicus brief in support of his appeal of an SEC Final Order that imposed sanctions for alleged violations of securities laws. NCLA’s brief argued that the Administrative Law Judge (ALJ) was improperly insulated from presidential removal and Mr. Jarkesy was deprived of his right to a trial by jury. Siding with NCLA, the court ruled in his favor on both claims.

George R. Jarkesy, Jr. was an investment professional and host of a nationally syndicated talk-radio program. Years after an initial investigation, SEC issued an Order Instituting Proceedings in 2013 against Mr. Jarkesy and his investment group, alleging violations of securities laws to be tried before an ALJ. Although Mr. Jarkesy tried to challenge the constitutionality of SEC’s administrative proceedings in federal court, the U.S. Court of Appeals for the D.C. Circuit denied jurisdiction in 2015. Thereby forced to undergo a seven-year journey through the administrative gristmill, he renewed those constitutional claims on his appeal of the SEC’s Final Order.

Writing for the majority, Judge Jennifer Elrod stated that the proceedings against Mr. Jarkesy suffered from three independent constitutional defects: (1) Petitioners (Jarkesy and his company) were deprived of their constitutional right to a jury trial; (2) Congress unconstitutionally delegated legislative power to SEC by failing to provide an intelligible principle by which it could exercise such delegated power; and (3) the statutory restrictions on removal of SEC ALJs violate separation-of-powers principles by interfering with the President’s control of the Executive Branch. The opinion cites NCLA’s founder, Prof. Philip Hamburger, several times. It invokes Cochran v. SEC too, a 2021 NCLA Fifth Circuit victory, on which the U.S. Supreme Court granted certiorari earlier this week to address the separate question of when individuals who face administrative proceedings before the SEC may bring their structural constitutional claims to a federal court.

The Fifth Circuit’s ruling recognizes SEC’s ALJ regime is unconstitutional because the removal protections ALJs enjoy make them unaccountable to the President. In 2010, the U.S. Supreme Court’s Free Enterprise Fund case made clear that multiple levels of “for-cause limitations … contravene the Constitution’s separation of powers.” Today’s decision also held that the federal securities laws—by authorizing SEC to impose civil penalties in an administrative proceeding—violated Mr. Jarkesy’s Seventh Amendment right to a trial by jury. Finally, the Fifth Circuit ruled that SEC’s in-house adjudication scheme delegates law-making power to an unaccountable and unelected administrative agency, whereas Article I of the Constitution vests alllegislative power in Congress.

NCLA released the following statements:

“The Supreme Court held in 2010 that executive branch officers may not enjoy more than one layer of protection from removal. By vacating this SEC proceeding seven long years after irremediable constitutional, financial and reputational damage has been done, the Fifth Circuit’s ruling exposes the irrational and ruinous heart of darkness that is compelled agency adjudication.”
— Peggy Little, Senior Litigation Counsel, NCLA

“SEC and other federal agencies for too long have gotten away with denying jury-trial rights to those whom they target in enforcement actions. The Fifth Circuit’s decision resoundingly affirms the jury-trial right guaranteed by the Seventh Amendment in all ‘suits at common law,’ a category that includes SEC’s claim here.”
— Rich Samp, Senior Litigation Counsel, NCLA

“NCLA applauds the Fifth Circuit’s recognition that Article I, Section 1 of the Constitution vests all legislative power in Congress. The Constitution separates legislative, enforcement and adjudicative power into three different branches precisely to protect liberty. Uniting those separate powers in the hands of one agency directly led to SEC’s violation of Mr. Jarkesy’s constitutional rights.”
— Mark Chenoweth, NCLA President

For more information visit the amicus page here.

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

Download the full document 

Washington, DC (March 19, 2021) – The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, has filed an amicus brief on behalf of petitioners in George R. Jarkesy, Jr., et al. v. U.S. Securities and Exchange Commission. NCLA is asking the U.S. Court of Appeals for the Fifth Circuit to review whether Mr. Jarkesy was adjudicated by an Administrative Law Judge (ALJ) who was improperly insulated from removal. Mr. Jarkesy was also denied his jury trial rights and equal protection of the law, among other problems. The U.S. Securities and Exchange Commission (SEC) Final Order being appealed here was issued seven years after his administrative proceeding ended, which puts the lie to the notion that ALJ proceedings save time.

George R. Jarkesy, Jr. was an investment professional and host of a nationally syndicated talk-radio program at the time when SEC conducted its administrative proceeding against him. He raised a constitutional claim against the SEC’s ALJs, who enjoy multiple layers of protection from removal by the President. In an earlier precedent called Free Enterprise Fund v. Public Co. Accounting Oversight Board, the Supreme Court made clear that officers of the U.S. may not be insulated from removal by multiple layers of protection without running afoul of the clause in Article II of the Constitution that requires the President to “take Care that the Laws be faithfully executed.”

In addition to dismissing Mr. Jarkesy’s constitutional removal claim, SEC violated his Seventh Amendment jury-trial rights as well as the equal protection component of the Fifth Amendment’s Due Process Clause. NCLA’s brief specifically spotlights the federal securities laws’ unequal allocation of the right to demand a jury in a proceeding seeking imposition of civil penalties. If SEC desires a jury trial, it can obtain one or avoid it by initiating an administrative proceeding. In contrast, the targets of those proceedings, like Mr. Jarkesy, do not have a similar option. Thus, federal securities laws unfairly deprive enforcement targets of the same right to demand a jury trial that SEC gets—a blatantly discriminatory practice.

The Seventh Amendment protects a litigant’s right to demand a jury trial whenever the federal government initiates proceedings to impose a civil penalty. The SEC’s attempt to deny Mr. Jarkesy his jury-trial rights on a faulty premise that the civil-penalty proceeding against him constitutes an exception to the Seventh Amendment is indefensible. SEC seeks a money judgment against Jarkesy for his alleged fraud. Such claims and remedies were not “unknown to the common law”—a prerequisite to any assertion by the federal government that its administrative proceedings are exempt from the Seventh Amendment.

NCLA is asking the court to vacate the SEC’s Final Order against Mr. Jarkesy.

NCLA released the following statements:

“SEC administrative proceedings deny many constitutional rights to Americans—particularly the right to be tried only once before an adjudicator competent to rule on their case. The Supreme Court decided in 2010 that executive branch officers may not constitutionally have multiple layers of job protection that insulate them from Presidential control. In 2018, it held that the tenure-protected SEC ALJs are such officers. Seven years ago, Mr. Jarkesy tried to have a competent federal court protect his rights—and was senselessly told he would have to undergo the ALJ proceeding first before a court will decide whether that proceeding is constitutional. This is a senseless, years-long deprivation of rights, inflicting grave injury to Mr. Jarkesy’s ability to work in his chosen profession and to his reputation. At long last, the Fifth Circuit Court of Appeals has a golden opportunity to right these wrongs—and free Americans from this cruel administrative maze.”

— Peggy Little, Senior Litigation Counsel, NCLA

“By seeking penalties in an administrative forum rather than a federal court, SEC is seeking to eliminate Mr. Jarkesy’s jury-trial right. But that right is protected by the Seventh Amendment, particularly when, as here, SEC reserves to itself the right to seek a jury trial when doing so suits SEC’s interests.”

— Rich Samp, Senior Litigation Counsel, NCLA 

For more information about this case visit here.

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

Download the full document