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A step toward restoring checks and balances


The Constitution’s checks and balances are not dead yet. Many federal agencies have taken to imposing fines without a jury trial. The 5th Circuit Court of Appeals just ruled that this violates the Seventh Amendment. The court also held that senior federal bureaucrats need to be accountable to the president. The media have reacted with apoplexy, but this ruling restores constitutional checks to an increasingly unaccountable administrative state.

The Seventh Amendment guarantees Americans a right to a jury trial “in suits at common law”— for example, charges of fraud. However, federal agencies often prosecute such cases before “administrative law judges.” Despite their name, ALJs are executive branch officers, not judges under Article III of the Constitution. ALJs do not use juries, and agencies do very well before these in-house judges. For example, the Securities and Exchange Commission wins
9 in 10
cases before its ALJs.

The Supreme Court has held that ALJs can decide cases involving “public rights” — matters such as awarding government benefits or licenses. But imposing fines for fraud is another matter altogether. An SEC ALJ fined George Jarkesy almost $1 million for (allegedly) defrauding investors in his hedge fund. Jarkesy sued, arguing the Seventh Amendment required a jury of his peers to decide his guilt — not an executive branch officer.
The 5th Circuit agreed
, holding that Jarkesy had a right to a jury trial because fraud was a common law claim.

This is welcome news. The Constitution’s framers considered jury trials as fundamentally important as voting rights. Using juries takes the power to convict out of the hands of government officials and puts it in the hands of the community — where it is much less likely to be abused. The Constitution might not have been ratified without the promise to protect jury trials in the Bill of Rights.

Nonetheless, administrative agencies (like the SEC) have widely imposed fines and penalties using ALJs in recent decades. These agencies effectively act as prosecutors, judges, and juries. The 5th Circuit’s ruling says they cannot wield this concentrated power.

The 5th Circuit also held that the SEC’s ALJs are unconstitutionally shielded from presidential control. The Supreme Court has allowed Congress to give some executive officers “for cause” removal protections. But in
Free Enterprise Fund v. PCAOB
the court ruled Congress cannot create multiple layers of these protections. So, if an officer has removal protections, an officer who reports to him cannot. The court held such multilevel removal protections undermine presidential control of the executive branch (this doctrine does not apply to civil service protections because they generally apply to federal employees, not officers).

SEC ALJs enjoy three levels of removal protections. They can only be removed for cause. For cause, SEC commissioners can propose removing them, and for cause, Merit Systems Protection Board members decide whether to dismiss them. The 5th Circuit held these layered removal protections unconstitutional.

This is another reason cases should go to judges and juries, not agency ALJs. Executive branch officers like ALJs cannot constitutionally be too independent of the president whose power they wield. Sending cases to the Article III judiciary protects judicial independence.

The Left’s reaction to the ruling has been
borderline hysterical
. Vox was
particularly over the top
, describing the ruling as the “judicial equivalent of tossing a Molotov cocktail into the federal government.” It isn’t, but Vox’s coverage illustrates why Voxsplainers should not always be taken at face value.

Vox claims the ruling would “blow up much of the government’s ability to operate.” Vox appears unaware that since defendants began raising these constitutional challenges, the SEC has switched almost entirely to pursuing cases before Article III judges. The agency
has only nine cases
pending before ALJs. Federal securities laws continue to be enforced quite effectively.

Vox also argues that the ruling could “throw the Social Security Administration (SSA) into turmoil … [and] overwhelm the federal court system” because it implies the agency’s “small army of ALJs also are not allowed to hear benefits disputes because they would also be too hard for the president to fire.”

Vox appears unaware that the Supreme Court
recently held
that unconstitutional removal protections do not stop agencies from operating. Rather, courts strike down the removal protections. At most, some decisions would get reconsidered. A ruling holding SSA ALJ removal protections unconstitutional would simply make it easier to fire bad ALJs.

Moreover, everyone agrees that ALJs can constitutionally judge cases like entitlement to Social Security Disability Benefits. These are classic “public rights” cases that need no jury. Even the libertarian advocacy group suing to limit ALJ authority
SSA can use them.

Vox’s histrionics aside, the 5th Circuit’s ruling will protect freedom. The ruling reaffirms constitutional checks on government power. The SEC can now only impose fines when a jury finds it appropriate — not a single unaccountable federal bureaucrat.

James Sherk is the former special assistant to the president for domestic policy on the White House Domestic Policy Council under President Donald Trump and is currently the America First Policy Institute’s director of the Center for American Freedom.

Washington Examiner

Political news and commentary about Congress, the president and the federal government from the Washington Examiner.

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