Policy Backgrounders

Jarkesy and the Future of Administrative Law Judges

July 03, 2024

Trusted Insights for What’s Ahead™

In SEC v. Jarkesy, the Supreme Court both eliminated the right of the Securities and Exchange Commission (SEC) to bring suits for fraud before Administrative Law Judges (ALJs) and took a major step towards restricting agencies’ use of ALJs more broadly, although it did not explicitly state that in the opinion’s formally narrow holding.

• The Seventh Amendment requires a jury trial in these types of civil suits; therefore a statute which permitted the SEC to choose between bringing an action before an ALJ and a Federal court violates the Seventh Amendment’s guarantee of a jury trial (defendants may waive the right).
• Many Federal agencies beyond the SEC use ALJs for at least some types of enforcement actions; these include the Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), the Federal Communications Commission (FCC), and the Consumer Financial Protection Bureau (CFPB), among others. Those agencies now face the prospect of litigation challenging their statutory authority in this area; some of these cases are highly likely to reach the Supreme Court.
• It is likely that the decision will lead to restrictions not only on enforcement agencies’ powers but their actual enforcement actions as well, given their limited budgets and the greater expense of bringing suit in Federal court.
• However, earlier final decisions reached by ALJs and administrative agencies are likely not subject to challenge on the basis of the recent decision.