The right-wing Supreme Court justices occasionally tipped into outright hostility Wednesday as they pressed a government lawyer with questions and hypotheticals about stripping the Securities and Exchange Commission (SEC) of some of its enforcement discretion.
“Are you saying I MISREAD IT, Mr. Fletcher?!” Justice Neil Gorsuch spat while he and the Department of Justice’s Brian Fletcher sparred over relevant case law.
The central question of the case is whether the SEC can continue to choose where it adjudicates certain cases — in its own administrative proceedings or in federal courts — without violating the regulated person’s Seventh Amendment right to a jury trial.
Congress explicitly gave the SEC the right to decide the venue, but didn’t detail how it should choose. Granting the agency that small discretionary power was enough for the 5th Circuit Court of Appeals to cry nondelegation — the right-wing notion that Congress can delegate none of its legislative responsibilities to agencies — sending the case up to the Supreme Court on appeal.
While the justices at Wednesday’s oral arguments in SEC v. Jarkesy didn’t touch on nondelegation explicitly, they had a lot to say about the agency supposedly overstepping its bounds and trampling on the rights of the common man. That anti-administrative posture, habitual for this court, strikes an especially discordant note given that the SEC was established and strengthened amid times of economic catastrophe driven by financial institutions’ malpractice.
“The extent of impact of government agencies on daily life today is enormously more significant than it was 50 years ago,” Chief Justice John Roberts fretted. “Should that be a concern for us or a consideration when we’re trying to consider what power the government has to take away the jury trial right?”
The justices used their colloquies with the lawyers to shoot back and forth at each other over the fundamental issue of agency power, which the right-wing legal world has long opposed in the quest to weaken regulation.
“With the Chief Justice making the point that it’s been 50 years and things have changed and that administrative agencies are more powerful, well so too in those 100 years, our problems have only gotten more complicated and difficult,” Justice Elena Kagan responded, about 20 minutes later. “It’s usually Congress that decides how to solve those problems and whether administrative agencies with the kind of expertise that they have are the appropriate way to solve those problems, not this court…”
Not content to let the point lie, Gorsuch — whose mother, a former Environmental Protection Agency (EPA) administrator, famously slashed the agency’s budget by 22 percent and bragged that she’d cut the spine of a book of water regulations from six inches to half an inch — returned to the argument soon after.
“We all agree Congress has a lot more problems on its plate today than it did 100 years ago or even 50 years ago, but doesn’t mean that the constraints of the Constitution somehow evaporate, do they?” he said.
While many of the conservatives focused on those regulated by the SEC potentially being stripped of their Seventh Amendment rights, the DOJ’s Fletcher urgently tried to impress upon them that upending the SEC’s adjudication system would have far-reaching consequences.
As experts told TPM last May when the 5th Circuit handed down its ruling, there is good-faith squeamishness about agencies serving as “judge, jury and executioner” in these in-house adjudications. But there are benefits too: There’s a specialist judge to hear the often technical questions, they provide consistency across the decisions and they avoid flooding the federal judiciary with a tranche of new cases.
And as Fletcher emphasized, the Supreme Court’s decision will touch agencies beyond the SEC.
“To bring all of those cases that are now proceeding administratively into the courts would be a huge imposition on the courts,” Fletcher said, responding to Justice Brett Kavanaugh raising the concern.
“We very quickly got to two dozen agencies that have the authority to impose penalties in administrative proceedings now,” he added. “I don’t want you to think that it’s just about the SEC and it can just go to court, because it really would have wide repercussions. EPA, Agriculture, it’s really all over.”
Cases centered on agency power will be a hallmark of this Supreme Court term, with one upcoming that will ask the court to overturn Chevron deference, a decades-old bedrock of agency authority. The war on the administrative state has intensified as the Supreme Court has become more conservative, with agencies from the EPA to the Occupational Safety and Health Administration (OSHA) taking hits.
In underscoring the importance of the SEC, Kagan traced the history of financial catastrophes that resulted in tougher securities legislation.
“Is Congress’ judgment after the Depression, after the savings and loan crisis, after the Great Recession — is Congress’ judgment that more powers were needed within an administrative agency entitled to no respect?” she asked incredulously.