As I have written more than once, the government we live under is not the one described in the Constitution. The ubiquitous and powerful arm of our government, found nowhere in the Constitution, is the Fourth Branch, the plethora of federal agencies, the administrative state. The administrative state has assumed much of the power that the Constitution assigns to the legislative and executive branches, a development that has progressed now for more than a century without serious challenge. Do we finally have a Supreme Court willing to take on the unelected Fourth Branch and restore a government that looks more like the one that is outlined in the Constitution?
That is a lot to hope for. But next term, the Court has agreed to hear SEC v. Jarkesy, a case that raises one of the fundamental issues spotlighted by Professor Philip Hamburger in his seminal book Is Administrative Law Unlawful?–the combination of investigative and judicial powers in federal agencies. The Wall Street Journal Editorial Board previews the case:
Mr. Jarkesy argues that a provision in the Dodd-Frank Act allowing the SEC to adjudicate enforcement actions and seek civil penalties in its in-house courts violates his Seventh Amendment right to a trial by jury. Before Dodd-Frank, the SEC had to litigate fraud claims in Article III federal courts where defendants enjoy more procedural rights.
He also says Congress improperly delegated to the SEC unreviewable power to choose whether to bring charges either in its in-house or federal court. The SEC has increasingly chosen the former because it has a home-court advantage. At the time of Mr. Jarkesy’s trial in 2014, the agency had won 100% of 200 contested cases compared to 61% in federal courts.
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The fundamental constitutional problem is that the SEC combines enforcement and judicial power, acting as prosecutor, judge and jury. This constitutional danger was underscored last month by the SEC’s disclosure that its enforcement staff had improperly gained access to information intended for commission officials who were adjudicating cases. This included information about Mr. Jarkesy.
The Fifth Circuit ruled in Mr. Jarkesy’s favor last May. The case gives the Supreme Court an opportunity to continue the process of whittling the administrative state down to size. And, who knows, perhaps one day restoring the government that the Founders thought they were founding.
