The Supreme Court on Thursday extended its record of anti-agency rulings, this time upending how the Securities and Exchange Commission (SEC) adjudicates some of its cases — a process blessed by Congress.
This undermining of both agency and congressional power demonstrates a danger beyond curtailing how the SEC can go after fraudsters, Justice Sonia Sotomayor wrote in a dissent, joined by her two liberal colleagues.
“The majority today upends longstanding precedent and the established practice of its coequal partners in our tripartite system of Government,” she wrote. “Because the Court fails to act as a neutral umpire when it rewrites established rules in the manner it does today, I respectfully dissent.”
Chief Justice John Roberts wrote for the majority. Justice Neil Gorsuch wrote in concurrence, joined by Justice Clarence Thomas.
The conservatives telegraphed their intent to come down this way during November’s oral arguments, their hostility towards the government’s position all the more notable given that the SEC was established and its powers strengthened during periods of glaring malpractice by financial institutions.
“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator. Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch,” Roberts wrote, echoing some good faith arguments against in-house adjudication (though in a way that advances the conservative majority’s typical anti-agency goals).
Still, the decision was more limited than some experts feared. The 5th Circuit Court of Appeals, for example, had found that Congress letting the SEC choose whether to adjudicate certain cases in federal courts or in-house violated the“nondelegation doctrine,” an idea spun up in the 1920s and seized upon in recent years by conservative scholars. The “doctrine,” which the conservative legal world has found very helpful to its war against the administrative state, holds that Congress can’t outsource any of its legislative authority to agencies. In a maximal reading, agencies would hardly be able to do anything without a new statute. In Thursday’s ruling, the Supreme Court did not reach that prong of the appeals court’s argument.
Under the ruling, some targets of SEC enforcement could also choose to waive their right to a jury trial — which is long, expensive and potentially riskier than going before an in-house judge who understands the technicalities of the pertinent law. On the other hand, the SEC may opt to pursue fewer enforcement actions, similarly to skirt the cost and resource intensiveness of a jury trial.
Sotomayor, though, points to the uncertainty the decision unleashes, given that many other agencies operate like the SEC. And perhaps even more concerningly, some can only pursue civil penalties in-house.
“The Occupational Safety and Health Review Commission, the Federal Energy Regulatory Commission, the Federal Mine Safety and Health Review Commission, the Department of Agriculture, and many others, can pursue civil penalties only in agency enforcement proceedings,” she wrote. “For those and countless other agencies, all the majority can say is tough luck; get a new statute from Congress.”
Ultimately, Sotomayor placed Thursday’s ruling in the greater tapestry of this Court’s chipping away at agency power — the long-running project of the legal right.
“Today’s decision is a massive sea change,” she wrote. “Litigants seeking further dismantling of the ‘administrative state’ have reason to rejoice in their win today, but those of us who cherish the rule of law have nothing to celebrate.”
Read the ruling here:
