A recent ruling at the U.S. 5th Circuit Court of Appeals threatens to upend federal agencies and impede their ability to enforce the law. The ruling in Jerkesy v. SEC could impact the ability of federal agencies to hold people and companies accountable for fraud, endangering the public or any other illegal act, and could reshape the federal government as we know it.
"Federal law doesn’t enforce itself. You can pass a law saying, ‘Hey, we need clean air or clean water, or cut down on fraud,’ but you need agencies willing and able to make sure that adequate actions are taken," says Paul Nolette, an associate professor of political science at Marquette University.
He explains that Jerkesy v. SEC is a pretty typical fraud case, which was heard by an administrative law judge through the U.S. Securities and Exchange Commission. Like many federal agencies, the SEC has judges who specialize in the kind of law concerning the agency. While the case is typical, the ruling was unusual and Nolette says it has the potential to completely upend federal enforcement.
"There's really three things going on here, three key holdings that are crucially important... What the first holding of this 5th Circuit Court said was that in cases like this where there's a penalty for in this case, fraud, then whoever's accused of this fraud has a Seventh Amendment right to a jury trial. ... The 5th Circuit said you can't just have the judge make these decisions, you have to have a jury," he says.
This would be difficult, Nolette explains, since federal courts are already understaffed and convening a jury would require lawyers to train juries in the intricacies of laws that can even be confusing for legal experts. The second holding hearkens back to a century-old legal doctrine.
"[It's] called the non-delegation doctrine, that was briefly en vogue in the Supreme Court that essentially held that Congress, if it's going to delegate any of its legislative power to an administrative agency like the SEC, then it has to give adequate direction in how the agency should carry out its duties. And essentially the 5th Circuit said they didn't do so here," Nolette explains.
In deciding that Congress didn't meet its duty of adequately directing the SEC, the 5th Circuit Court is effectively taking that power from Congress and giving it to the judiciary to decide how administrative agencies can (or cannot) enforce federal laws.
"The last part of it, another constitutional argument, was that essentially because these administrative law judges can't be removed at will by the president or anyone else in the executive branch that there's certain protections there that actually violates part of Article II which outlines the executive branch, because it limits executive power over these administrative law judges," says Nolette.
Ruling that administrative law judges can only serve at the behest of the president would allow administrative courts to become a partisan tool of the executive branch, and could greatly reduce their efficacy and efficiency.
The impact of these rulings could be devastating for federal agencies like the SEC, EPA, and OSHA, among dozens of other agencies that ensure protections for consumers, employees and the quality of life for people in the U.S. Nolette says federal courts are already overburdened, and funneling every potential violation through the court system could allow abuses to continue or go unpunished for much longer.
He explains, "This makes that process much more difficult, I think that's the bottom line. So yeah, as these cases drag on for months, potentially years with all the appeals, there's a lot going on — or should I say not going on — in the background when it comes to enforcement of environment laws, consumer protection, and so forth."
