Securities and Exchange Commission v. Jarkesy
Oral argument transcript · No. 22-859 · October Term 2023 · argued November 29, 2023 · the respondent won
Decision: votes, opinion and citations · Official transcript (PDF) · Argument audio at the Supreme Court
Advocates
- Brian H. Fletcher, Deputy Solicitor General, for the petitioner
Transcript
From the Court's official transcript; speaker labels as in the transcript, with advocates' full names from its list of appearances.
Chief Justice Roberts: We'll hear argument this morning in Case 22-859, the Securities and Exchange Commission versus Jarkesy. Mr. Fletcher. ORAL ARGUMENT OF BRIAN H. FLETCHER ON BEHALF OF THE PETITIONER
Brian H. Fletcher: Thank you, Mr. Chief Justice, and may it please the Court: Throughout our nation's history, Congress has authorized the agencies charged with enforcing federal statutes to conduct adjudications, find facts, and impose civil penalties and other consequences prescribed by law. More than a century ago, this Court described the validity of those statutes as settled beyond any possible constitutional question, and since the enactment of the APA, those and other administrative adjudications have often been conducted by officers specially appointed for the purpose and removable only for cause. This Court should reject all three of Official 1 the Fifth Circuit's reasons for upsetting that longstanding and entrenched practice. First, this Court's decision in Atlas Roofing considered many of the same arguments presented today and reaffirmed that Congress does not violate the Seventh Amendment when it authorizes an agency to impose civil penalties in administrative proceedings to enforce a federal statute. Respondents have not asked this Court to overrule Atlas or the long line of precedents on which it rested, and they also haven't identified any relevant distinction between that case and this one. Second, Congress does not violate the nondelegation doctrine when it gives an agency the choice of pursuing administrative or judicial proceedings. The decision whether and how to pursue enforcement action is a quintessentially executive power, and Congress doesn't violate the Constitution when it leaves that decision to executive discretion, as it has traditionally done. Finally, the APA's limited removal protection for ALJs is entirely consistent with this Court's decision in Free Enterprise Fund. Official 1 There, the Court confronted an unprecedented agency, a powerful law enforcement board, that was insulated from removal because -- by an unusually stringent provision and that was not subject to the SEC's control. Here, in contrast, ALJs are purely adjudicative officers who are subject to the Commission's plenary control and review of their decisions, and the APA's modest for-cause removal standard gives the Commission ample authority to remove those ALJs if they fail to accept supervision. I welcome the Court's questions.
Justice Thomas: But you do agree, Mr. Fletcher, that it depends on the type of right involved?
Brian H. Fletcher: We do. We take this Court's statement of the public rights doctrine from Atlas Roofing and other cases, and the argument we're making here is limited to the particular strand of the public rights doctrine that the Court has described in Atlas and other cases.
Justice Thomas: And how would you define public rights? Official
Brian H. Fletcher: So I acknowledge, I think the Court has acknowledged most recently in Oil States, that the public rights concept is -- is contested. The Court has never fully plumbed its outer perimeters. I think what I'd say is the strand of the doctrine that's relevant here is the same one from Atlas, which is, when the federal government, an agency, is enforcing a federal statute in exercise of its sovereign powers, that's a matter involving public rights.
Justice Thomas: If I don't agree with you that we're talking about public rights here, that -- that private rights are involved, would you then think that it is required that it be adjudicated before an -- an Article III court?
Brian H. Fletcher: So we haven't made an argument -- you know, there are some circumstances, cases like Schor and Thomas, where the Court has said in some circumstances it may be permissible to assign initial adjudication even involving private rights to non-Article III tribunals. We're not making an argument like that here. We're resting on the argument that this Official 1 is a classic public rights case within this Court's precedents and also we think properly viewed as a matter of first principles.
Justice Sotomayor: Mr. Fletcher, could you go directly to Justice Thomas's question? He's already written on this issue, and he thinks that a private right is any right that involves property, life, or liberty basically.
Brian H. Fletcher: Yeah.
Justice Sotomayor: Could you address that part of -- of the Justice's stated views?
Brian H. Fletcher: I -- I'm happy to. Justice Thomas, you have addressed this at length in Axon and in other writings. You know, we -- the place where I think we would depart from you is we think that the Court's cases going back all the way to Murray's Lessee stand for the proposition that it can be a matter of public rights within -- for purposes of Article III even if private property was involved. Murray's Lessee, after all, was taking someone's property in order to satisfy a debt to the government. Same thing in Stranahan. The same thing in Atlas Roofing. Official 1 What we think makes it a matter of public rights and means that it does not offend the separation of powers to assign its enforcement and initial adjudication to executive branch officials is that it's a classic exercise of executive power to enforce federal law by applying the law to the facts in a particular case and by imposing the consequences that are specified by law.
Chief Justice Roberts: Could -- could I ask you just a couple of examples and see where it falls under your definition? The federal government, in association with the states, built the interstate highway system, an enormous benefit to members of the public. Could the government decide that accidents interfere with what they were trying to accomplish in the highway system and create an agency to hear and adjudicate who's liable, responsible, and how much for accidents on the highway system? No court, no jury?
Brian H. Fletcher: No, Mr. Chief Justice, not under the strand of cases that we're relying on here. I take the hypothetical to be could Congress replace the tort system that would Official 1 adjudicate liability between individuals, the party involved in a crash, take that --
Chief Justice Roberts: Well, only -- only on a system where they gave the benefit which those people that have the accidents are taking advantage of. I understood that to be part of the aspect of the public rights doctrine.
Brian H. Fletcher: I think there are strands of the Court's public rights cases that talk about government benefits. I think usually the sense in which that's relevant and the only sense it would be relevant to the argument we're making here is when it's the government itself. It's -- public rights are matters between the government and the public. Sometimes that's --
Chief Justice Roberts: So -- so what about healthcare? The government's involved in the healthcare sector. Could the -- an agency determine that the cost of medical malpractice claims throughout healthcare, not just the particular aspect which the government's participating in, interferes with what they're trying to accomplish in the healthcare system, and so the subject of medical malpractice will Official 1 be handled by a government agency, an expert agency, to reduce the costs of the benefit of healthcare that the government provides? No court, no jury?
Brian H. Fletcher: Not if we're talking about adjudicating matters of private rights. In Crowell's terms, the liability of one person --
Chief Justice Roberts: Well, that's --
Brian H. Fletcher: -- to another under the law is defined.
Chief Justice Roberts: Yeah.
Brian H. Fletcher: Potentially yes if we're talking about taking an area of law, concluding that common law remedies aren't sufficient, erecting a structure of federal regulations, and empowering an agency to enforce it. That's the OSH Act in Atlas Roofing. That's the securities laws at issue here.
Chief Justice Roberts: Well, if I could just interrupt because you said no because it involves private rights. Well, what is the intersection or distinction? I mean, I could see -- it seems to me that it involves public Official 1 benefits as well, I mean, the -- the provision of healthcare and people take advantage of it, and this is a government decision that they want that public benefit to be available more economically, more efficiently. Yes, it has private rights in it. The people who are injured have a right, I guess, to pursue the people who injured them. But it's also a public right. And -- and how are we supposed to decide which of those two parameters prevails?
Brian H. Fletcher: So I think you can acknowledge, as the Court has done before, that there are fuzzy boundaries at the outer edges of some parts of the public rights doctrine. But I think the difference between those cases and this one is that in this case, we're talking about what we had in Atlas, which is a federal agency that's charged with enforcing rights enacted for the benefit of the public, in Justice Scalia's words in Granfinanciera, rights held by the public, and that --
Chief Justice Roberts: Well, but, on the private side, I guess they would be normal fraud claims, right? I mean, the -- the Official 1 securities claims regulated by the SEC look a lot like claims that could be brought in private -- in court before a jury for fraud.
Brian H. Fletcher: So there's some analogy there. There was also some analogy in Atlas Roofing, you know, the OSH Act. The claims that were brought there looked in some ways like negligence or wrongful death claims for workplace hazards that had long been brought in common law. The difference is that there and here, Congress has enacted a federal regulatory regime that doesn't just federalize securities fraud or federalize negligence in workplaces the way some of Your Honor's hypotheticals were positing, but it erects a comprehensive federal scheme that goes well beyond common law fraud, and it differs in sort of every particular. It's --
Justice Kavanaugh: Let's --
Justice Jackson: And it's not even purporting to be common law fraud. I mean, I -- I understood that the Seventh -- the -- the Seventh Amendment protects private rights of action that the common law has created and is given to private parties to enforce. Official 1 And when you have that situation, when you have a common law fraud claim -- that's what you're trying to bring -- you have the right under the Seventh Amendment to bring that in an Article III court with all of the protections that exist, including a jury trial. But, when Congress has created a new right, a new duty, you know, the -- the duty that exists under the Securities and Exchange Act that -- that is created by law, I thought Atlas Roofing was saying you're not worried about stealing a common law claim and putting it into a non-Article III tribunal, that that's really the issue. So, when we're looking for, you know, this circumstance, we're trying to ask at the beginning, is there a common law claim or right that is being implicated here?
Brian H. Fletcher: So I think that's -- I mostly agree with that. I would supplement it a little bit. I think it's not just the presence of a statute that's important. But, if we're talking about a case in court between private parties, the Seventh Amendment can apply to a case involving legal claims even if they arise Official 1 under a statute rather than under the common law. The critical point is that the Seventh Amendment right to trial by jury has always depended on the nature of the forum and the nature of the cause of action. By its terms, it applies to suits at common law.
Justice Gorsuch: And, Mr. Fletcher --
Justice Kavanaugh: So your whole --
Justice Gorsuch: -- we -- oh, I'm sorry. Please.
Justice Kavanaugh: Go ahead.
Justice Gorsuch: Well, we'd agree that the right to trial by jury, whether it's criminal or civil, is a very important foundational freedom in -- in American society and a check on all branches of government, wouldn't we?
Brian H. Fletcher: We do.
Justice Gorsuch: Okay. And we'd agree that if the government sought the same penalties in a criminal proceeding, a jury trial right would attach?
Brian H. Fletcher: I -- I think that depends, Justice Gorsuch. I think, on fines, Official 1 this is a point that Atlas made. Actually, there, government can seek fines and it doesn't trigger the Sixth Amendment jury trial right.
Justice Gorsuch: Penalties? Penalties?
Brian H. Fletcher: Criminal fines.
Justice Gorsuch: Criminal penalties, you -- you think a jury trial right would attach? A felony, you know, this is a felony fraud and the guy can go to jail and he can get penalties, you think no jury?
Brian H. Fletcher: I -- I -- I'm not saying that there's no limits on that. I'm just saying a point that the Court made in Atlas was that for small fines, those pick up --
Justice Gorsuch: Oh, small fines?
Brian H. Fletcher: Yes.
Justice Gorsuch: Okay. All right. But -- but, here, we're not talking about a small fine, though.
Brian H. Fletcher: Yeah, so -- and, again, I don't want to fight too much on this. I agree --
Justice Gorsuch: So we'd agree --
Brian H. Fletcher: -- there would be a Official 1 jury required in a criminal case.
Justice Gorsuch: -- we --
Brian H. Fletcher: Yes.
Justice Gorsuch: In -- in this criminal -- if this were a criminal case, it would have a jury, right?
Brian H. Fletcher: I -- I think that's very -- I don't know honestly where the line would fall, but I -- I'm not going to disagree that criminal cases involve juries, and if this were civilly brought in a court, it would require a jury. I concede that as well.
Justice Gorsuch: Okay. And -- well, let's -- let's come to that in a second. So returning to the Chief Justice's questions about administrative regimes, I've got another one for you. Let's say the government revived the Sedition Act and decided that, you know, it's really important to have a federal agency who could bring penalties for defamation against the government. Jury trial, no jury trial?
Brian H. Fletcher: Unconstitutional on First Amendment grounds for sure. Official 1 (Laughter.)
Justice Gorsuch: Forget about the First Amendment. You -- too easy. We're talking about the Seventh Amendment and the right to a jury trial, and that -- that is an important and ancient right too.
Brian H. Fletcher: Yeah. And I'm -- I'm -- what I'm saying and the reason I responded that, I realize that's not the point of the question, but I think the included force --
Justice Gorsuch: Then -- then -- then let's answer the question.
Brian H. Fletcher: Yeah. So, if it's a --
Justice Gorsuch: Seventh Amendment right or no Seventh Amendment?
Brian H. Fletcher: -- otherwise valid federal regulatory statute --
Justice Gorsuch: Yep.
Brian H. Fletcher: -- being enforced by the government --
Justice Gorsuch: Yep.
Brian H. Fletcher: -- pursuant to its sovereign powers, that's Atlas Roofing in this case.
Justice Gorsuch: No -- Official
Brian H. Fletcher: Lots of other constitutional problems.
Justice Gorsuch: -- no jury trial right. I think that has to be the implication of your argument. I want to talk to you for just a minute about how you deal with Tull and Granfinanciera. We agree that Tull found that some civil penalties under the Clean Water Act imposed by the government do trigger the Seventh Amendment, right?
Brian H. Fletcher: When heard in court.
Justice Gorsuch: When heard in court. And that's the key distinction as far as you're concerned?
Brian H. Fletcher: Yes.
Justice Gorsuch: What if the government tomorrow decided, well, we don't like those jury trial that come with that, we're -- we're going to -- we're going to effectively overrule Tull by moving those to administrative proceedings? Then the Seventh Amendment would disappear on your account, wouldn't it?
Brian H. Fletcher: Yes, but that's Atlas Official 1 too. And the Court recognized and looked at all of the history and the importance of the Seventh Amendment but said it's always been tied to the nature of the forum. There have always been circumstances where important rights get adjudicated without a jury in admiralty record --
Justice Gorsuch: I -- I understand that.
Brian H. Fletcher: -- proceedings.
Justice Gorsuch: I think the key --
Brian H. Fletcher: And this is just that.
Justice Gorsuch: -- the key part of that answer is yes, that that would overrule the preexisting Seventh Amendment right this Court recognized in Tull.
Brian H. Fletcher: I disagree that it would overrule that right respectfully, Justice Gorsuch. I think the right in Tull --
Justice Gorsuch: It would evaporate it?
Brian H. Fletcher: No, not --
Justice Gorsuch: It would dissipate it? What verb would you prefer?
Brian H. Fletcher: No. The Seventh Official 1 Amendment right that the Court recognized in Tull is the one in the Seventh Amendment, which is a right in suits at common law.
Justice Gorsuch: Okay.
Brian H. Fletcher: If it's an administrative proceeding. It's not a suit at common law.
Justice Gorsuch: Okay. So let's talk about Granfinanciera, which applied Tull's test in a non-Article III tribunal, right?
Brian H. Fletcher: Yes.
Justice Gorsuch: Okay. And it said the Seventh Amendment applied there in a non-Article III tribunal.
Brian H. Fletcher: Yes.
Justice Gorsuch: Okay. I understand that your distinction there is that it happened to be between two private parties.
Brian H. Fletcher: Not just our distinction, the Court's distinction in Granfinanciera repeatedly.
Justice Gorsuch: No, no, but between this -- your argument between this case and that case is that's the distinction. The relevant distinction is private parties, right? Official
Brian H. Fletcher: Which was core to Granfinanciera's reasoning --
Justice Gorsuch: Oh, sure that's -- fine.
Brian H. Fletcher: -- is what I want to say.
Justice Gorsuch: Now let's say that -- that the government brought a fraudulent conveyance argument instead of a private party. Then the Seventh Amendment right would again on your account, I think, dissipate, disappear, whatever verb you want to use?
Brian H. Fletcher: So I -- I'm not as sure about that, Justice Gorsuch. I think the principle in Atlas Roofing and the one we're relying on here is government enforcement in its sovereign capacity. If you're talking about government in its proprietary capacity bringing a fraudulent conveyance claim as an ordinary participant in bankruptcy --
Justice Gorsuch: No, it creates some statute much like the one we have here that looks a lot like fraud but a little bit different in sovereign capacity. Official
Brian H. Fletcher: Yeah. So there are a lot of statutes that say that in those circumstances, the government can proceed in administrative proceedings without a jury trial right, yes.
Justice Gorsuch: Thank you.
Justice Sotomayor: Can we go --
Justice Kavanaugh: What -- what --
Justice Sotomayor: -- to that question? Justice Gorsuch called it small differences. There are big differences between a common law fraud claim and a claim under the SEC, correct?
Brian H. Fletcher: Yes.
Justice Sotomayor: Would you just break them down?
Brian H. Fletcher: Sure. So the critical one for purposes of separation of powers is that when the Securities and Exchange Commission finds facts, conducts adjudications, imposes the consequences required by law, it is executing the laws in a classic Article II sense. Murray's Lessee, City of Arlington, this Court has long recognized that it's executive power to apply the law to the facts Official 1 and impose consequences prescribed by law in particular cases. So, from the question of asking has Congress tried to assign an Article III power to some entity that's not an Article III, we think it hasn't done that when it's authorized an agency to find facts and impose consequences in enforcing the law. As to specific distinctions on securities, so it's not just it's a different enforcer, it's also that the requirements look different. Congress didn't just federalize the law of fraud. It adopted a comprehensive regulatory regime with lots of prophylactic registration, disclosure, and other requirements totally unknown to the common law, provided for enforcement by the public, not by private parties, and provided different remedies, including not just things like disgorgement or damages but bars on participation in the industry, deregistration of securities, civil penalties. None of that was found in the common law.
Justice Kavanaugh: Mr. Fletcher --
Justice Sotomayor: The remedies -- Official
Justice Kagan: Aren't there also different elements --
Justice Sotomayor: I'm sorry. If I may finish. The remedies were different, but so are the -- the elements of the fraud.
Brian H. Fletcher: The elements are different as well, exactly. Even if you're --
Justice Sotomayor: It's actually not even fraud in all circumstances.
Brian H. Fletcher: That's the point I was trying to make when I said that it's not just fraud cases. It's also prophylactic disclosure and other requirements that don't look anything like fraud. And then, Justice Kagan, I think this is where you were going, even if we're talking about the subset of SEC cases that do look more like common law fraud, the elements are different precisely because it's not trying to right a private wrong. We're trying to vindicate the public's right to fair and honest markets. And so we don't require a showing of reliance. We don't require a showing of damage Official 1 to private parties. As this Court said in Kokesh, what we're looking for --
Justice Alito: Well, what if the statute did require that? Would your argument be different?
Brian H. Fletcher: So I don't -- parts of my argument, I think I wouldn't be able to rely on those distinctions. I think my fundamental argument would not change because we view the critical distinction as -- and the one relevant to separation of powers as being that enforcement by the executive.
Justice Alito: Well, as to the elements of -- of reliance, does it make sense to say that the Seventh Amendment provides stronger protection when it is easier for the -- the -- the -- the prosecuting party to prove a claim than otherwise?
Brian H. Fletcher: I don't think that's a relevant difference for Seventh Amendment purposes. I think the relevant --
Justice Alito: I thought you were saying that that was a difference.
Brian H. Fletcher: No, I'm saying that --
Justice Alito: There are elements of Official 1 common law fraud that are omitted under this -- under these circumstances.
Brian H. Fletcher: I took the question, the thrust of the question, to be are we concerned that there's something, some sort of circumvention going on. Has Congress taken common law fraud and handed it from the courts to an agency. The -- I think the constitutionally relevant distinction in our view is that this is something that has been assigned to a federal agency to enforce --
Justice Kavanaugh: Mr. Fletcher, your -- your whole argument on this civil penalties point seems to depend on Atlas Roofing. You've mentioned it already probably 10 times. Atlas Roofing, the other side says, has been severely undermined by later cases, such as Tull and Granfinanciera. Justice White, as you know, suggested parts of Atlas Roofing had been overruled in his dissent in the latter case. And it does seem odd from a constitutional perspective to say that a private Official 1 suit triggers the Article III right to a federal court and a jury, a private suit against you for money, but a government suit against you for money is somehow exempt from those Article III and Seventh Amendment and due process requirements simply because the government attaches a different label, the public rights label to it. So I think that's a strong argument on the other side. I wanted you to respond to that.
Brian H. Fletcher: Yeah. There were several things packed in there. I'll see if I can get to all of them. So, first of all, on the notion that we're relying solely on Atlas, Atlas obviously squarely considered this question, considered a lot of the same historical evidence, and couldn't have been clearer about what it was holding, but I don't want to suggest that that's all that we have. You know, Atlas itself is relying on a line of decisions that go back to Helvering versus Mitchell, to the two Elting cases, to Stranahan from 1909, and -- and even before Official 1 that, all of which stand for the same proposition that civil penalties in government enforcement actions are permissible, consistent with Article III and the Seventh Amendment. So, as to the question whether the Court has backed away from that, I think exactly the opposite is true. So Tull is about government proceedings in court, and it makes clear that its holding applies in court and doesn't extend to administrative proceedings. Granfinanciera and other cases have addressed a sort of different and much more contested question about when we're dealing with liability between two private parties, a fraudulent conveyance action there, how -- when can Congress take that and assign that to non-Article III tribunals.
Justice Kavanaugh: And what sense does it make to say the full constitutional protections apply when a private party is suing you, but we're going to discard those core constitutional historic protections when the government comes at you for the same money?
Brian H. Fletcher: Yeah. So the plurality in Northern Pipeline, which I think, you know, Official 1 also recognized exactly this issue, sort of acknowledged that concern and said the reason is that the Article III question is grounded in the separation of powers. We're asking, are we concerned about Congress taking away the judiciary's power? And that's not -- that is a concern when you have disputes between private parties here today.
Justice Kavanaugh: Well, what about individual liberty? The purpose of the separation of powers is to protect individual liberty. And your individual liberty, it would seem, is even more or at least equally affected when the government is coming after you than another private party.
Brian H. Fletcher: So I agree with that, Justice Kavanaugh. And I think the Due Process Clause certainly has something to say here. In cases like Atlas Roofing and more recently in Oil States, the Court has emphasized that judicial review of agency action may well be required. I think our point is just that as a separation-of-powers matter, as a historical matter, it's permissible for Congress to give Official 1 adjudications to executive officials, that can be executive power, and that Congress has a lot of flexibility in deciding how to provide judicial review.
Justice Jackson: And isn't that what causes --
Justice Barrett: Mr. Fletcher, I have a question about Atlas Roofing, and maybe you can help me because I'm having a hard time figuring out the logic of it. So Atlas Roofing says this: The government can commit the enforcement of statutes and the imposition of collection -- and collection of fines to the judiciary, in which case a jury trial would be required. But the United States can also validly opt for administrative enforcement without jury trials. So I take that to mean that it's completely up to the forum, so the right to a jury trial would --
Brian H. Fletcher: Right.
Justice Barrett: -- depend on the forum --
Brian H. Fletcher: Right.
Justice Barrett: -- rather than the Official 1 nature of the action, whether the action is a private right or a public right. How can that be?
Brian H. Fletcher: So I -- I -- I think the answer to that is that the Seventh Amendment depends on the forum. That's the text and tradition of the Seventh Amendment. It's suits at common law. So it never applied in equity. We also don't think it applies in administrative proceedings. But there's an important check on when Congress can assign matters to administrative proceedings, and that's the public rights/ private rights distinction. That comes from Article III.
Justice Barrett: But it seems to me that what Atlas Roofing is saying here is that the public rights/private rights, just this part of it, because it seems to me --
Brian H. Fletcher: Yeah.
Justice Barrett: -- that part of your argument depends on reading Atlas Roofing for all -- all that it's worth. And I agree Atlas Roofing is a good case for you. But it seems to me that that part that I read and part of the Official 1 premise of Atlas Roofing really doesn't depend on the private rights/public rights; it really kind of depends on the forum. And it's obviously true, right, that if you're in front of an agency, you're not entitled to a jury trial. So that's -- that's the whole question.
Brian H. Fletcher: Yeah. It --
Justice Barrett: So it seems to me, if you have an entitlement to a jury if you're in federal court, I don't understand then how you not have that right, how it can go to an agency.
Brian H. Fletcher: So we look at the question the way the Court did most recently in Oil States, which is consistent with Atlas Roofing. We think the first question is, is this a matter that can be assigned to an agency? And that's governed by the public rights --
Justice Barrett: Public rights.
Brian H. Fletcher: -- question under Article III, right? And if the answer to that question is yes, then the Seventh Amendment doesn't impose additional constraints because, by its terms and by tradition, the Seventh Official 1 Amendment doesn't apply.
Justice Barrett: Then why would you have those rights if it's -- if it -- if the government chooses to bring the action in the court, why would you have those rights? Because I take it what Atlas Roofing is there -- what Atlas Roofing is saying there is that if you have the exact same action, and let's assume it's public rights, that you could somehow have a right to a jury trial if it's in a court.
Brian H. Fletcher: Right. And I think the difference is, if it's in a court, the Seventh Amendment applies by its terms. If it's in -- permissibly assigned to an administrative agency, the Seventh Amendment doesn't apply.
Justice Barrett: But why? It doesn't apply to everything.
Justice Kagan: Is that because the Seventh Amendment says suits? Is that why?
Brian H. Fletcher: That -- that's part of it. I mean, I think that's very strong textual evidence. That's also the longstanding historical understanding and the way the Court has always approached it.
Justice Kagan: I mean, it's -- it's a Official 1 really interesting question that Justice Barrett raises because I think it appeals to this intuition, like, we know jury rights are very important, and everybody agrees with that. And the idea that you would have it in one place and not have it in another place, well, why is that? But I'm taking you to say that we've said that many times over, that the only relevant question here is the Article III question, that once the Article III question is decided in favor of allowing the proceeding to go forward in an agency, there is no independent Seventh Amendment question. And I guess the question is, well, why shouldn't there be? Were we right to have said that --
Brian H. Fletcher: Yeah.
Justice Kagan: -- I think four or five times?
Brian H. Fletcher: At least.
Justice Barrett: But that's actually not quite my question because, in Atlas Roofing, it seemed to say -- I mean, I -- I -- I agree that the Seventh Amendment and then the separation of powers under the Article III line Official 1 of cases reinforce each other in this respect, but then why in Atlas Roofing is it assuming that the exact same suit would trigger a right to a jury trial in a court but not -- but could simultaneously be assigned to an agency? Because I take that to be the exact same thing. I mean, I take the Court really to kind of be saying there if the OSH Act -- if -- if -- if the agency had decided to bring it in a court, that it would have been triggered.
Brian H. Fletcher: Yeah.
Justice Barrett: And, obviously, it's not true that everything that's brought in a court triggers the right to a jury trial. It's only those that were suits at common law.
Brian H. Fletcher: Right. Yeah.
Justice Barrett: Right? So I -- I -- I guess I just don't understand the logic here but for a different reason than Justice Kagan's saying at least I -- I think.
Brian H. Fletcher: So I apologize, Justice Barrett. I may -- I may not be completely following. I think it's that only if it is in court do you ask the Seventh Amendment question, which, as you say, sometimes the answer is yes, Official 1 you have a jury trial right; sometimes the answer is no, you don't have a jury trial right. Our view is that the text of the Seventh Amendment tells you, you don't even ask that question if you're in front of a different tribunal, like an administrative agency --
Justice Jackson: But, Mr. Fletcher, I don't understand, like Justice Barrett, why the forum is leading this issue when -- I know your time is up. Mr. Chief Justice, do you want me to wait until --
Chief Justice Roberts: Why don't you finish your question and then --
Justice Jackson: Okay.
Chief Justice Roberts: -- we'll move on to --
Justice Jackson: I -- I don't understand why the forum is the first question. I thought that the first question was, what is the nature of the claim? In other words, is this a common law action? The concern that you mentioned many times was is the law of fraud being federalized. And when the law of fraud is being federalized, Official 1 the Seventh Amendment is implicated because what the Seventh Amendment is doing is protecting the right of a person who has a common law fraud claim to bring it in federal court and not have it directed into some forum where they don't get a jury trial. So it seems to me that the initial question is, what is the right or the duty or whatever that is being established? And so Atlas Roofing begins by acknowledging that the Act created a new statutory duty, right? So, when we have this new statutory duty, it's not a common law duty, the question is, can this new duty be directed to an administrative tribunal without Seventh Amendment protections or not? And Atlas Roofing says of course because it's a new duty. It's not -- we're not worried that they are stealing the common law claims and putting it into this situation. So, for me, the answer is not starting with, where is this taking place? It's starting with, what is the claim or the duty at issue? And if it's a new statutory duty, says Atlas Roofing, we've held forever that Congress can assign it to the court, Congress can assign it to the Official 1 administrative agency. The Seventh Amendment isn't implicated because we're not talking about a common law suit.
Brian H. Fletcher: Justice Barrett --
Chief Justice Roberts: Briefly, counsel.
Brian H. Fletcher: -- Justice Jackson, I think the reason why the Court has looked at it differently is that Article III actually provides more protection. It's not just concerned about protecting people's access to the courts in common law cases where there's a right to trial by jury. It also protects the right to go to an Article III court if you have an equitable action between two parties.
Justice Jackson: Right. But what about the Seventh Amendment?
Brian H. Fletcher: Right.
Justice Jackson: Aren't we asking what the Seventh Amendment protects?
Brian H. Fletcher: And -- and the point that I'm making is the point from Oil States and the Court's other cases, which is the Seventh Amendment is essentially downstream from Article III. It applies -- it's a forum-dependent right Official 1 by its terms, suits at common law. If you have something permissibly assigned to an administrative agency, you don't have a suit assigned at common law. And so, as the Court said at the end of its opinion in Oil States, if you've answered the Article III question first and it's permissibly in an agency, that resolves the Seventh Amendment question too. I'm sorry, Chief Justice.
Chief Justice Roberts: Thank -- thank you, counsel. Just a couple of questions. Justice Kagan pointed out that what the Constitution says were suits at common law. And -- and I think that may be a better focus than a -- a -- a concept that we've had a great deal of trouble with anyway of public -- public rights. And it's also what we said in -- in Stern, that the one thing you -- you can't take away from the court, you know, suits made of the stuff of the traditional actions at common law tried by the courts at -- at West -- at Westminster. But it can't be the case that it's a suit -- would be a suit at common law, it would have been tried at Westminster, but the Official 1 government calls it something different, but it's the same thing? I mean, that -- suits at common law would seem to be a significant constraint on what the government can take away from the courts and arrogate to its own employees as hearing examiners.
Brian H. Fletcher: So, Mr. Chief Justice, I think those constraints exist, but I think the Court has located them correctly in Article III and the Due Process Clause, not just in the Seventh Amendment. And I think part of that is because those provisions actually provide more protection and more access to courts than the Seventh Amendment would because the Seventh Amendment is limited to suits at common law.
Chief Justice Roberts: Thank you. And just one more question. Atlas Roofing is 50 -- 50 years old. And the extent of impact of government agencies on daily life today is enormously more significant than it was 50 years ago. I mean, does that have any -- should that be a concern for us or a consideration when we're trying to Official 1 consider what power the government has to take away the jury trial right or, as an antecedent to that, to take away the right to go into court? I mean, the government is much more likely to affect you and proceed against you before one of its own agencies than in court, and that concern and that threat is far greater today than when Atlas Roofing was set up. And -- and as a general matter, it does seem to me to be curious that and unlike most constitutional rights that you have that right until the government decides that they don't want you to have it. That doesn't seem to me the way the Constitution normally works.
Brian H. Fletcher: So let me start with the first question about changes since Atlas Roofing. I think it's true there are more agencies now than there were then. I don't think that changes the relevant constitutional principles. I think the one thing that it does highlight is the extent to which Congress has relied on Atlas Roofing. You know, at that time, Congress said -- the Court said these are already very common Official 1 practices. They have only become more so ever since as Congress has relied extensively on this Court's holding that this is a permissible way to provide for the government to enforce the rights held by the public. Now I take your point about questions of fairness and about the rights of individuals. Those are important considerations. I think the -- the only place I would differ from you is that we think those are best answered by the Due Process Clause, which speaks to the requirement of judicial review and by the provision of judicial review of the agency's actions at the back end. And, finally, you asked about the sort of question about the forum and isn't it a little odd to think of a constitutional right that applies in some places and not in others. And the point that I was trying to get at in response to Justice Barrett earlier is that that's always been a feature of the Seventh Amendment. At the founding, you could have had exactly the same sort of --
Chief Justice Roberts: Well, that's right, but that wasn't my point that it could be Official 1 in one place or another. My point was more it could be in one place we have the protections of Article III against the government, or the government can decide we think we'll be better off deciding that in our own agency before our own employees. That's not just one place or another. It seems to me that undermines the whole point of the constitutional protection in the first place.
Brian H. Fletcher: So I -- I disagree, Mr. Chief Justice. I think that's something that Congress has long done, has provided for administrative adjudications first and judicial review later. I think that's obviously subject to due process constraints, but when it is consistent with those constraints, and there's no challenge here that this scheme is not, then it is consistent with our tradition and -- and not just since Atlas Roofing, but, really, you know, this was an established practice for more than a century before that as well.
Chief Justice Roberts: Thank you. Justice Thomas? Official
Justice Thomas: Mr. Fletcher, would you give us a brief definition, your definition of public rights?
Brian H. Fletcher: Sure. I think the -- I'm not going to try to do it comprehensively because I think that there are some sort of contested questions that are not at issue in this case. For purposes of this case, we would just ask the Court to say what it said in Atlas Roofing, which is, when the government in its sovereign capacity is enforcing a federal statute, then it is enforcing public rights.
Justice Thomas: So it's the nature of the government's enforcement?
Brian H. Fletcher: Right. It is -- it is. I think I would put it maybe the way Justice Scalia did in Gran -- his Granfinanciera concurrence where he said it's are we enforcing rights held by the public. That's the meaning of public rights.
Justice Thomas: So how would you -- how would property rights fit in that? Those are usually considered private.
Brian H. Fletcher: Right. And I Official 1 understand the intuition that you have written about and that some scholarship has written about that says the -- the public rights/private rights question should be are there private rights like property or liberty at stake on one side of the ledger. And the reason why I think that can't be the way to ask the question is that in all of -- many of the Court's public rights cases going back to Murray's Lessee, there have been private property interests that would be affected. There are administrative adjudications that happen all the time that affect property, that affect liberty in the immigration context, that affect very important interests of individuals that we still conceive of as public rights matters that can go to agencies in the first instance.
Justice Thomas: Thank you.
Chief Justice Roberts: Justice Alito?
Justice Alito: I wanted to follow up on a question asked by the Chief Justice and then a question asked by Justice Kavanaugh. So the -- the question asked by the Chief Justice concerns the textual argument that Official 1 the Seventh Amendment doesn't apply here because it's not a suit. Why is it not a suit?
Brian H. Fletcher: I think because a suit is traditionally understood to be a proceeding in court.
Justice Alito: So, if something -- if a -- a claim at common law for which a party would have the right to a jury trial is simply transferred to some other tribunal, that makes it not a suit?
Brian H. Fletcher: When it's assigned to executive officers to find the facts and apply the law, that's not a suit. And that's something that's been happening since the founding, often very informally, and I think our point here is that Congress can provide trial-type procedures to make sure that that's more fair to parties and more accurate, but when it does that, it doesn't change the nature of the power.
Justice Alito: Doesn't that seem like --
Brian H. Fletcher: It's still executive --
Justice Alito: -- doesn't that seem Official 1 like a pretty patent evasion of the Seventh Amendment to say this protection which was regarded at the time of the adoption of the Bill of Rights as sufficiently important to merit inclusion in the Constitution can be nullified simply by changing the label that is attached to a tribunal?
Brian H. Fletcher: And the difference, Justice Alito, is that I don't think it's just changing the label. It is changing the nature of the power being exercised. And I want to underscore again that I think it very well may be the case that there are constitutional rights that require some amount of judicial process. Our point is just that we think those are found in the Due Process Clause and not in the Seventh Amendment.
Justice Alito: What if the -- what if the -- the suit is not the -- the -- the adjudication, the -- the dispute is not between the government and a private party but between two private parties, but it's before an agency. Would you say that is still not a suit?
Brian H. Fletcher: I think that is still Official 1 not a suit, but Article III would have much more to say about that, and it there imposes much greater constraints on Congress's ability to assign that sort of dispute between private parties to an agency in the first place.
Justice Alito: Well, I -- I don't understand why you keep shifting to Article III. I mean, the question before us is the Seventh Amendment, which speaks directly to the question of suits at common law and to a private right and to the right of a jury trial. Or I'll -- I'll take out the private right part.
Brian H. Fletcher: Yeah.
Justice Alito: It speaks to suits at common law and -- and the right to a jury trial.
Brian H. Fletcher: Right. So the reason I'm focused on Article III is that because the first answer to the Seventh Amendment is it's suits at common law. Proceedings in an agency aren't suits. I take the force of your response, which is it seems odd to say that we can just take something away from a court and hand it to an agency, and I'm trying to respond to that by saying there is a constraint on that and an Official 1 important one. It's Article III and the Due Process Clause, just not the setting.
Justice Alito: Yeah. Well, Article III was in the Constitution in 1787, but when Congress and the states put the Seventh Amendment into the Constitution, they apparently thought that Article III wasn't going to provide sufficient protection. Can we not infer that?
Brian H. Fletcher: I -- I think you absolutely can. But we think you should continue to, as you have before, read the Seventh Amendment's protection by its terms, which is to be focused on suits in court, suits at common law.
Justice Alito: All right. The -- the other question was one that Justice Kavanaugh asked, and I want you to go back to it. And -- and I want to -- I want you to talk about the theory behind the Seventh Amendment. You have -- you have arguments based on precedent. You have your -- your textual argument about suit. But I just want you to talk about the theory of the Seventh Amendment. Isn't the theory of the Seventh Official 1 Amendment that people in this country should have protection against having their liberty or property taken away by officials who are answerable to a powerful executive, that the jury should be set up as a buffer between what the -- in that situation? Isn't that the theory of it?
Brian H. Fletcher: I -- I don't think, respectfully, Justice Alito, that's the primary theory behind the Seventh Amendment. That's -- that's part of it sometimes. But, as we explained, you know, the -- the proponents of the Seventh Amendment identified a lot of concerns about checking judges, about providing protection in private suits, and, really, I think the most telling evidence that it wasn't concerned about government enforcement is that in five of the seven state ratifying conventions that proposed something like the Seventh Amendment, they limited it to suits between private parties or involving real property. So they would have excluded the government altogether.
Justice Alito: Well, I'm talking about the Seventh Amendment to the Constitution Official 1 of the United States. Justice Kavanaugh's question was what sense does it make to say you have this protection when you're being sued by a private party, whose resources are certainly going to be more limited than the resources of the federal government, but when the same thing happens to you and the party that's against you is the federal government, well, this right to a jury trial simply goes out the window. Does that make sense?
Brian H. Fletcher: I -- I think it does because I don't think it's the same thing that happens. If it's truly the same thing, if the government is proceeding against you in court on the same basis as a private party, then that's Tull, and the jury trial right does attach. But what is different about an administrative proceeding is that then we're in the world of Congress permissibly, in a way that it is permitted to do under the Constitution, assigning to executive officials the responsibility for finding facts and imposing consequences, which happens all the time every day.
Justice Alito: All right. Thank you. Official
Chief Justice Roberts: Justice Sotomayor?
Justice Sotomayor: Let's go back to that distinction you were drawing earlier. You said that Justice Thomas and I think Justice Alito are concentrating on the Respondents' interests. But I think that we haven't really concentrated on what -- how the difference between a private right and a public right exist. I understood a public right to be a right possessed by the sovereign.
Brian H. Fletcher: Exactly.
Justice Sotomayor: And it's an interest that's not -- that's possessed by the sovereign, correct?
Brian H. Fletcher: Exactly, yes.
Justice Sotomayor: And that's why that interest in this case is to protect the --
Brian H. Fletcher: Integrity of the securities markets, yes.
Justice Sotomayor: And that would include actions that have nothing to do with fraud, like a failure to disclose, registration requirements, et cetera, et cetera. If you violate those, you pay a penalty for it. Official
Brian H. Fletcher: Exactly right. And I think that also points up why it would be very difficult if the Court were to try to go down my friend's road and to say that the Seventh Amendment or Article III depended on how closely analogous the agency's enforcement action was to some suit at common law or to common law fraud. I think that would require having to parse on almost a provision-by-provision of the securities or other laws or even on a case-by-case basis, and there's no real principled yardstick for asking how analogous is too analogous for those purposes.
Justice Sotomayor: Well, I mean, there's -- and you're absolutely right, from Murray's Lease down to our INA case to everything else, we've permitted the public interest to be protected in an administrative proceeding, correct?
Brian H. Fletcher: Correct. Yes.
Justice Sotomayor: Now I'm going to pose what I consider the hardest question. I see the remedies here as remedies that are not generally available in common law, whether it's being barred or -- from practice or from -- or Official 1 other things like that. Penalties seem similar, but how about if it included restitution, meaning now we're going to pay the money to a private party? Would that pose a problem?
Brian H. Fletcher: I don't think it would. You know, first of all, in this case, there's a disgorgement remedy, and the SEC -- the money goes to the SEC in the first instance, but then the SEC has to --
Justice Sotomayor: And -- and I think disgorgement is always very different because that's more like a fine or -- or --
Brian H. Fletcher: Yeah. So our view is that even if part of the remedy that the government is securing for the public, for the sovereign in the name of vindicating the public interest then is later paid over to private parties, that's still a matter of public rights. And that's not new here. The two Elting cases from 1932 that we describe, the penalties were not just a civil monetary penalty enforced by administrative officials. Those were immigration cases about unlawfully bringing non-citizens to the country. And administrative Official 1 officials also made people who violated those laws refund the non-citizens' fare for the passage to the country. So this idea that administrative penalties and -- permissibly enforced through -- in a public rights way includes providing some relief to private individuals dates back at least that far.
Justice Sotomayor: Thank you.
Chief Justice Roberts: Justice Kagan?
Justice Kagan: So, Mr. Fletcher, I -- I think one of the oddities of this case is, if you look at the question presented and then you read Atlas Roofing, you wonder why this case is here, in other words, that Atlas Roofing simply resolves the issue. But you suggested that Atlas Roofing was not a one-off in the sense that it had a real historical grounding. You said that in your introduction. And I wanted to give you an opportunity to explain how that's true. But I also want you to go forward from Atlas Roofing because, of course, there are precedents that we have that have been eroded over time, that have been changed, that -- that Official 1 don't get a hundred percent of their value 50 years later as they do the moment they were issued. And I think some of the questions that you've been asked here, you know, are to the effect of, well, might that be true with Atlas Roofing either because we have some idea of first principles, true or constructed, or because we have some idea that subsequent precedents in some sense narrowed or weakened Atlas Roofing. So go backwards for me. Go forwards for me.
Brian H. Fletcher: And so let me start with backwards and then forwards. Going backwards, Atlas Roofing grounded its decision in a long line of prior cases. I think the best one to look at if you were just going to pick one is Oceanic Steam Navigation versus Stranahan. It's an immigration case from 1909. Many of the same arguments are presented. A party was subject to a fine by administrative officials, and they came to court and they said, if you're going to impose a civil monetary penalty on me, you've Official 1 got to go to an Article III court with all of the protections that that entails. And the Court said in the line that I quoted in my introduction the understanding from the beginning has been that Congress can legislate, impose civil penalties, and have executive officials impose those penalties in the first instance. That same thing is reflected in Passavant, which is a case from the -- 1893, in the Elting cases from 1932, in Helvering versus Mitchell, and those aren't just, you know, pinpoints in the landscape. All of them are saying this is a thing that Congress has long done. It is a thing that commonly happens. So it's not just precedent. I think it's also practice of the government that this Court has often looked to as being very important in the separation of powers. So, going forward both to what the Court has done so far and what some of the questions suggest that the Court might do, I don't think there's any way to read the Court's subsequent cases as retreating from Atlas Roofing. All of them that my friend relies on Official 1 dealt with the sort of more contested fringes of the public rights doctrine when you're talking about the liability between two private parties. That's Granfinanciera, Thomas, Schor, Stern versus Marshall. All of them are careful to carve out and say we're talking about this special zone of liability between two private parties --
Justice Kagan: Indeed, if I might just interrupt, I mean, when you started in your introduction and you said what the Court has often said, that this is a very complicated, difficult area, but the Court has often said that when it's faced cases involving two private parties in which their dispute is embedded in a federal statutory scheme, and those are the cases that we found complicated and difficult.
Brian H. Fletcher: Exactly, and you have Justice Scalia, you know, in Granfinanciera saying I would limit the public rights doctrine to cases involving the government because he disagrees with where the Court had gone on cases involving private parties. But this piece, the strand that I'm relying on here, is really a through line that the Court has never Official 1 questioned. And when -- I think one of the questions suggested Justice White, who was in dissent in Granfinanciera, said the Court has overruled Atlas Roofing, that was because he read Atlas Roofing to speak to the private parties cases, which we don't think it did, and the Court didn't agree.
Justice Kagan: He read Atlas Roofing to impose a ceiling, which the Court had said, no, it doesn't where also -- there are also public rights involved in some private/private cases.
Brian H. Fletcher: Right. Exactly. And -- and so then, if I could, let me just -- you asked about going forward and some of the questions that have been raised about first principles. We don't think for the reasons that I described that there's anything wrong with Atlas Roofing as a matter of first principles. You know, quite to the contrary, we think this is a separation-of-powers matter, and this strand of the public rights doctrine is a reflection of it being a core exercise of executive power sometimes to adjudicate matters Official 1 and apply the law to the facts and impose consequences. It's immigration, it's seizing goods, it's taxes, it's customs all throughout our history. It happens all the time. And -- and I think the concern that I have about trying to reexamine all of that at this late date is really the consequences it would have both jurisprudentially and practically. So, as a jurisprudential matter, you know, some of the scholarship that Justice Thomas has relied on in his very thoughtful separate writings on this question very much acknowledged that they are saying that administrative law has taken a wrong turn a hundred years ago and needs to be fundamentally re-imagined. I think that's a heavy task for the Court to take on, and I think, if you -- the -- you were inclined to do it, you certainly shouldn't do it in a case like this one, where I don't understand my friends to have asked you to overrule even Atlas, much less all of the other cases, much less tried to make the showing that really grapples with all of the consequences.
Justice Kagan: And when the Chief Official 1 Justice made the point that it's been 50 years and things have changed and that administrative agencies are more powerful, well, so too in those a hundred years, I mean, our problems have only gotten more complicated and difficult. And it's usually Congress that decides how to solve those problems and whether administrative agencies with the kind of expertise that they have are the appropriate way to solve those problems, not this Court, which decides, oh, well, we really only need common law suits to deal with securities regulation.
Brian H. Fletcher: Exactly, Justice Kagan. And I think the growth of civil penalties in administrative proceedings in particular, a lot of that is traceable to a report from the Administrative Conference of the United States in the 1970s that said this is a practice that is, you know, on sound constitutional footing. Some agencies have long had it, but we think there would be real salutary benefits both to the regulated parties and to the agencies of giving them the authority to do this because it can be done more efficiently in administrative proceedings because often administrative Official 1 penalties are a lesser sanction than some of the penalties that were at stake there, like permanent debarment from an industry or revocation of a license or something like that. And Congress has taken that ball, blessed by this Court in Atlas Roofing, and really run with it in a lot of other statutes since.
Justice Kagan: Thank you.
Chief Justice Roberts: Justice Gorsuch?
Justice Gorsuch: So, Mr. Fletcher, with respect to your argument that Congress can move something from courts into agencies and the Seventh Amendment doesn't speak to that because it's not a suit, I think Noel Webster described a suit as any action or process for the recovery of a right or a claim before any tribunal, which would seem to be a problem. That's a pretty contemporaneous definition. And then Justice Brennan in Granfinanciera I think addressed your argument pretty squarely when he said "Congress cannot eliminate a party's Seventh Amendment right to a jury trial merely by relabeling the cause of Official 1 action [...] and placing [...] jurisdiction in an administrative agency." Thoughts?
Brian H. Fletcher: Yeah. So I -- I guess I think that's still inconsistent with what the Court has said in Granfinanciera.
Justice Gorsuch: I just quoted from Granfinanciera.
Brian H. Fletcher: I -- I'm sorry. I -- I misspoke. I -- I don't think that's what the Court held in Granfinanciera. It's inconsistent with what the Court said.
Justice Gorsuch: Are you saying I misread it, Mr. Fletcher?
Brian H. Fletcher: No, Justice Gorsuch. I'm saying --
Justice Gorsuch: You said -- you said that that's a purely taxonomic change.
Brian H. Fletcher: Yes.
Justice Gorsuch: And that that's not enough to render it no longer a suit for purposes of the Seventh Amendment, right?
Brian H. Fletcher: Yes. I think, in context, Granfinanciera is talking about a proceeding that was in a bankruptcy court in the Official 1 Article III setting. I think the Court's subsequent cases, including Oil States, have said, if you're permissibly in an Article III tribunal, then the Seventh Amendment doesn't have independent work to do. I apologize for misidentifying the case I was relying on.
Justice Gorsuch: All right. But it -- it would seem strange. And we don't usually say the -- the government can avoid a constitutional mandate merely by relabeling or moving things around. It's -- it's as much a violation to do something indirectly as it is directly we usually say, right?
Brian H. Fletcher: In some cases, but, again, the Seventh Amendment has always been forum-dependent. And, Justice Gorsuch, I just think it would also be odd to say, if executive officials impose penalties or other consequences very informally in ways that don't look at all like a tribunal because it's just the Customs officer saying you owe this much duties, then that's --
Justice Gorsuch: I'll get to -- I'll get to Customs in a second, but with respect to Official 1 the growth that the Chief Justice and Justice Kagan were talking about, this SE -- this is not your grandfather's SEC, right? Penalties were not something that were part of Jim Landis's original design against private parties, let alone against all private persons, right?
Brian H. Fletcher: That's right.
Justice Gorsuch: That came in the 19 -- started in 1984 and was limited to insider trading claims, and then it was expanded, and what is at issue before us is a 2010 amendment to the law, right?
Brian H. Fletcher: Not quite. Both 2010 and the 1990 --
Justice Gorsuch: .
Brian H. Fletcher: -- amendment as well, but yes.
Justice Gorsuch: The 1990 and the 2010.
Brian H. Fletcher: Yes.
Justice Gorsuch: Yeah. So it's a relatively new thing, right?
Brian H. Fletcher: For the SEC, yes, not for agencies writ large. Official
Justice Gorsuch: I -- I understand. And as I -- I went back and looked just to see, you know, what's the scope of -- of the problem here, you know, and I came up with -- my law clerk found that the ALJs in the SEC, there are a total of five of them. Is that about right?
Brian H. Fletcher: I -- I think it may be three now, yes.
Justice Gorsuch: May be three?
Brian H. Fletcher: Yes.
Justice Gorsuch: So we're not talking about a huge number of cases.
Brian H. Fletcher: Again, for the SEC, yes. For the administrative -- the administration writ large, it's a huge number.
Justice Gorsuch: Most -- most of the ALJs in -- work for places like the Social Security Administration, right, which give benefits and we're not talking about penalties.
Brian H. Fletcher: About 80 percent of them are at SSA.
Justice Gorsuch: Okay.
Brian H. Fletcher: The rest of them are at other agencies, yes.
Justice Gorsuch: Okay. And -- and Official 1 then, with respect to history, your best examples I think are on page 23 of your brief.
Brian H. Fletcher: Twenty-two to 23, yeah.
Justice Gorsuch: The Customs, right?
Brian H. Fletcher: Yeah.
Justice Gorsuch: Tax and immigration?
Brian H. Fletcher: Yes.
Justice Gorsuch: Okay. Those are the three areas you'd have us point to. Any others?
Brian H. Fletcher: I mean, Atlas Roofing as well.
Justice Gorsuch: Obviously.
Brian H. Fletcher: Right. Couldn't leave it out. But, you know, I think also the reasoning of those cases is not tied to those particular exercises of power, and, in fact, to the contrary, in Stranahan, the challenger in that case said this is a power that only exists in tax and customs cases. It shouldn't extend here. And the Court rejected that and said it's not that limited, it applies here too. And then, in Atlas Roofing, the challenger said it's just customs and tax and immigration, and again the Court said it's not so limited. Official
Justice Gorsuch: Okay. Then, with respect to Tull and Granfinanciera and their impact, Justice White, for whom I have great fondness, thought that they were overruled, didn't he?
Brian H. Fletcher: He did in part, but that was based on a different understanding of -- of the Atlas Roofing decision than the one the majority had.
Justice Gorsuch: And then you referenced Justice Scalia and his -- his belief that there had to be the government involved in the case to render it a public right. He made clear he thought that was a minimum.
Brian H. Fletcher: Yes.
Justice Gorsuch: Right? That was not the test writ large, correct?
Brian H. Fletcher: Yes. And it's not our test writ large either.
Justice Gorsuch: And then we all agree Congress has a lot more problems on its plate today than it -- than it did a hundred years ago or even 50 years ago. But that doesn't mean that the constraints of the Constitution somehow evaporate, do they? Official
Brian H. Fletcher: I agree.
Justice Gorsuch: Thank you.
Chief Justice Roberts: Justice Kavanaugh?
Justice Kavanaugh: You've been resisting talking about the Seventh Amendment, saying that doesn't apply because it's not a -- it only applies to suits in court and said we should talk about Article III and the Due Process Clause. So I'm going to take you up on that.
Brian H. Fletcher: Great.
Justice Kavanaugh: On the public rights definition, because that seems to be the key line for Article III, do you agree?
Brian H. Fletcher: Yes.
Justice Kavanaugh: Okay. And in Stern, the Chief Justice's opinion said that public rights extended, quoting Northern Pipeline's plurality, only to matters arising between individuals and the government in connection with the performance of the constitutional functions of the executive or legislative departments that historically could have been determined exclusively by those Official 1 branches, which suggests a line that may track the Due Process Clause between benefits and penalties. And I want you to respond. Is that incorrect, that statement, or is -- what -- what's -- what's the -- your response to that line from Stern v. Marshall?
Brian H. Fletcher: Yeah. So the -- the Court has said that a couple times. I want to say what I think it means, and then I hope to say why I think, if you read it the other way, as you're suggesting, that might have some really troubling implications.
Justice Kavanaugh: Sure. Go ahead.
Brian H. Fletcher: So, on what I think it means, I think the Court is talking about matters that could be determined exclusively by the other branches insofar as Article III is concerned. I don't take it to be saying things that you could assign to the executive branch and foreclose all judicial review altogether. I think that's true of a lot of the things that we think of as being classic public rights-type cases. And I think the reason why I would warn you away from reading it differently Official 1 is that if you read it that way, as -- as some of the scholarship has done, then I think Congress really and this Court has only two choices. Option one is Congress can assign something to the initial adjudication by an administrator, but if that can happen, then the implication is it can also bar judicial review altogether. And option two is it has to go to an Article III court in the first instance, and that would be a sea change for all sorts of things that are not benefits, but I'm talking about, you know, the assessment and collection of taxes and penalties, customs and penalties, the immigration laws, the detention and removal of non-citizens. All of those things are things that are done in the first instance and have long been done in the first instance by administrative officers. And if you adopt the rule that it's only things that we can say can be done exclusively by the administrative officers without any judicial review at all, then I think you're in a really untenable choice in those Official 1 areas and lots of others too.
Justice Kavanaugh: Right. But the flip side, I guess -- and you've said this -- you know, this started with Atlas Roofing -- you know, I know you have your cases it relies on, 1972 ACUS report that you properly mentioned, and it seemed like a small matter then potentially, but, as others have pointed out, it expands to other agencies. And I think the logic of your position is that you could go all the way in the other direction from what you were just saying and the Congress could assign all federal government civil penalty suits to be housed at in-house executive agencies. Is that your position?
Brian H. Fletcher: Potentially, yes, you know, again, if it fits all the criteria.
Justice Kavanaugh: What's the potentially?
Brian H. Fletcher: I -- I -- I think the questions that you'd want to ask are, you know, there are constraints about is this the sort of federal regulatory scheme that you're talking about in Atlas Roofing and here that's always Official 1 been a feature of these. We're not just trying to have -- federalize, you know, tort law or something like that.
Justice Kavanaugh: Right.
Brian H. Fletcher: Right? Also, there are constraints on what can be done through civil means rather than criminal means in terms of the severity of the sanctions that can be imposed.
Justice Kavanaugh: But assuming those things away, yes, the logic of your position is that --
Brian H. Fletcher: Yeah. Yeah.
Justice Kavanaugh: -- that -- well, and on the Due Process Clause, because you've said let's talk not about the Seventh Amendment but the Due Process Clause --
Brian H. Fletcher: Yeah.
Justice Kavanaugh: -- that seems problematic to say the government can deprive you of your property, your money, substantial sums, in a tribunal that is at least perceived as not being impartial in the sense that it's an in-house executive agency where the commissioners start the enforcement process, oversee the enforcers, and then appoint the -- Official 1 the adjudicators and review the adjudication. That doesn't seem like a neutral process. So your response to that is Atlas Roofing?
Brian H. Fletcher: Well, a -- a couple. I mean, first of all, you know, we haven't talked at all about the removal issue yet. I guess I --
Justice Kavanaugh: I'm going to get to that.
Brian H. Fletcher: Then I'll -- then I'll save it for that. (Laughter.)
Brian H. Fletcher: I -- I was just going to say that to the extent that those are concerns, the remedy that my friends are asking for on the removal question goes in exactly the opposite direction.
Justice Kavanaugh: Right, would exacerbate it, yeah. Okay.
Brian H. Fletcher: It -- it -- exactly. So -- but -- but saving that for removal and focusing just on the -- the Seventh Amendment and -- and that question, you know, I -- I think the takeaway that I would give you from the Official 1 unappealing dichotomy that the sort of really strict understanding of trying to locate this rule in Article III and saying only if it could be exclusively assigned to an administrative agency with no judicial review at all can it ever be assigned to them on the one hand or everything's got to go to the district court in the first instance, you know, I think that's untenable as a practical matter. It's overturning a huge swath of law. I think, if you have concerns about that -- and, again, this wouldn't be the case to explore them -- but, if you did, I think the Due Process Clause is a better tool because it provides the ability to draw finer distinctions than the sort of blunderbuss ones that I think you would be forced into if you adopted the public rights Article III inquiry as the solution to -- to any problem you perceive there.
Justice Kavanaugh: One of the oddities of this statutory scheme is that the SEC is authorized to and, in fact, does bring suits in federal court. Why?
Brian H. Fletcher: I think that's part of Official 1 the chronology really. You know, the suits in federal court, by and large, came first in terms of when penalties could be sought, and Congress later came along and added them to the administrative proceedings as well. You know, I think that's different. Congress is making judgments at different times.
Justice Kavanaugh: But why would the SEC bring suits in federal court?
Brian H. Fletcher: I'm -- I'm sorry, I thought you were talking about the --
Justice Kavanaugh: No, I -- I was. You answered the correct question, but a follow-on question is, why would -- would the SEC bring suits in federal court?
Brian H. Fletcher: Yeah. So it makes that judgment on a case-by-case basis depending on the case. And it might depend on what remedies are available in the two forums. You know, here, penalties are available in both, but there are certain other remedies that differ, and they might make a judgment about that. They might also make a judgment about which one is likely to be faster under the circumstances of the case. There are some Official 1 circumstances where -- especially where they've settled a case or where it's a sort of follow-on proceeding that's going to be very simple that they choose to file those administratively rather than burdening the courts with those. And there are other circumstances where they have a very technical regulatory issue that they're looking to achieve consistent treatment across a bunch of cases, and they conclude that that can more easily be done administratively than in court.
Justice Kavanaugh: But, in terms of the repercussions if we went down the civil penalty line, for the SEC at least, they could bring all -- all the civil penalty suits in federal court. If benefits were the other side of the line, that excludes Social Security and those kinds of agencies. Why don't you talk about, because I think you were talking about this with Justice Gorsuch, the ramifications if the line were civil penalty in terms of other agencies?
Brian H. Fletcher: Yeah. So I -- I think they are large. You know, already in Atlas Roofing, the Court said that these are common. Official 1 They've become only more so since the 1992 ACUS report that we cite says that that --
Justice Kavanaugh: But the -- a small interruption. They -- they could always just bring the suit in federal court, though. They're filing everything in the in-house tribunal. They could just file the same kinds of things in federal court.
Brian H. Fletcher: The SEC, yeah -- yes, but I thought we were shifting over to other --
Justice Kavanaugh: Yes.
Brian H. Fletcher: -- agencies as well.
Justice Kavanaugh: Some of them can and some --
Brian H. Fletcher: Some --
Justice Kavanaugh: -- would need new statutes.
Brian H. Fletcher: Some can; many cannot. And to bring all of those cases that are now proceeding administratively into the courts would be a huge imposition on the courts. Just in terms of the numbers, you know, the 1992 ACUS report that we cite counted more than 200 statutes at that point. And we very quickly got to two dozen agencies that have the authority to Official 1 impose penalties in administrative proceedings now. So it -- it really would be -- I don't want you to think that it's just about the SEC and it can just go to court --
Justice Kavanaugh: Yeah.
Brian H. Fletcher: -- because it could really have wide repercussions.
Justice Kavanaugh: No, I know FTC and -- and others. I'm aware of that.
Brian H. Fletcher: EPA, Agriculture. I mean, it's -- it's really all over.
Justice Kavanaugh: FERC. We have a FERC amicus brief. Okay. On the Article II issue quickly, one question there, that this seems problematic under Free Enterprise Fund.
Brian H. Fletcher: So, Justice Kavanaugh, I actually disagree. You know, of course, in Footnote 10, Free Enterprise Fund reserved this question. And I understand there are some times where the Court technically reserves a question, but the logic of the prior decision effectively answers it. And I just think this is exactly the opposite. So the Court said here we have something that's novel, it's completely Official 1 unprecedented, and it effectively insulates a law enforcement and policymaking board from the SEC's control. And, here, none of those things are true. This isn't novel. It goes back to a carefully negotiated compromise in the APA itself, adopted with the support and after study by the executive branch and Congress. It's been the law for more than three-quarters of a century.
Justice Kavanaugh: Thank you.
Chief Justice Roberts: Justice Barrett?
Justice Barrett: My questions are just clarifying just to make sure I understand exactly where you're going here. Okay. So this is public rights, not private rights, because it doesn't map on exactly to common law fraud. You don't have to show as much. You don't have to show damages.
Brian H. Fletcher: Principally, our view is it's public rights, not private rights, because it's enforcement by the government of rights that are held in the public to vindicate a public interest in the securities markets. Official 1 We think also, in addition, there's no concern that Congress is circumventing the laws of fraud by just replicating or federalizing the common law fraud because the elements are very different. But that's not the principal distinction we're relying on.
Justice Barrett: Not the principal distinction. Okay. If the SEC pursued Jarkesy in federal district court, he's entitled to a jury?
Brian H. Fletcher: Yes.
Justice Barrett: And that's because it's a suit because the judge is the fact-finder?
Brian H. Fletcher: That's because it's a suit.
Justice Barrett: Well, and the --
Brian H. Fletcher: And -- and -- and under this --
Justice Barrett: Yes. Suits --
Brian H. Fletcher: -- Court's analysis in Tull --
Justice Barrett: Yes. Qualify --
Brian H. Fletcher: -- it would qualify as triggering a Seventh Amendment right. Official
Justice Barrett: -- judicial proceedings.
Brian H. Fletcher: Exactly. Yes.
Justice Barrett: But, when it's brought in front of the ALJ, exact same proceeding, but it's executive action there because the ALJ and the agency is the one finding the facts?
Brian H. Fletcher: It -- exactly. It looks like a trial. It has trial-type procedures, but that's an exercise of executive power. The jury trial right has always been thought of as an adjunct to the exercises of the judicial power in the courts. And the lesson from all of this Court's cases -- City of Arlington, Murray's Lessee -- is that even when the executive branch conducts an adjudication and applies the law to the facts, even if it looks like trial-type procedures to enhance fairness, that's not the sort of suit that requires an exercise of the judicial power or comes with --
Justice Barrett: Because it's forum-dependent?
Brian H. Fletcher: Exactly. Official
Justice Barrett: Okay. And then I just want to clarify, Justice Kavanaugh asked you what's the limiting principle because Congress always, we hope, is acting in the public interest.
Brian H. Fletcher: Yeah.
Justice Barrett: So what is the limit on Congress's ability to shift these kind of adjudications for civil penalties to administrative agencies?
Brian H. Fletcher: Yeah. So, again, it has to be a federal regulatory scheme. It has to be enforced by the government. That's the critical public rights distinction. We're not displacing the courts from adjudicating disputes between private parties and raising that set of separation-of-powers concerns. In -- in addition, I think you could say we don't have any concerns about just federalizing the law of fraud or something like that. This is very different. It's a comprehensive regulatory scheme like the one the Court had in the OSH Act. And then, in addition, you have the sort of constraints on when Congress can assign something to an Official 1 administrative agency in the Due Process Clause in the civil/criminal --
Justice Barrett: But just to interrupt for one second, but, you know, we are talking here about securities law, but Congress can enact such a scheme and has enacted such schemes in many, many, many different areas. The Chief Justice began by pointing some of those out. So, in all of these areas, healthcare, highway management, what have you --
Brian H. Fletcher: Exactly. And --
Justice Barrett: -- it could happen.
Brian H. Fletcher: -- so I -- I acknowledge that the rule that I'm giving you is broad. That's in part because Congress has done this in many, many different circumstances. We think validly so. But the breadth of the rule is consistent with our historical practice and with this Court's decisions, you know, not just Atlas but before that too.
Justice Barrett: Okay. So we've talked some about fallout. So, here, what the SEC got from Jarkesy in disgorgement was more than civil penalties.
Brian H. Fletcher: Correct. Official
Justice Barrett: Right. And the SEC also got other kinds of injunctive relief.
Brian H. Fletcher: Correct.
Justice Barrett: Right. So why isn't -- why do you need civil penalties? Because, you know, Jarkesy's not disputing that you can get those kinds of things in administrative proceedings. So why civil penalties too?
Brian H. Fletcher: So can I just quibble with the premise? Because this is one of the things that concerns us about this case.
Justice Barrett: Okay.
Brian H. Fletcher: He is focused on civil penalties, but disgorgement also affects the private right to property. And so some of his arguments, I think the implication of them is those things also couldn't happen in administrative proceedings. I'm a little unclear about that because the argument moves back and forth from Article III to the Seventh Amendment, but I think the potential implications of cutting back on the Atlas Roofing understanding of public rights doesn't just apply to penalties. It's also cases involving disgorgement or other such remedies. Official
Justice Barrett: Even if they were considered traditionally equitable remedies?
Brian H. Fletcher: So, again, if -- if you -- there's a couple ways that you could depart from Atlas Roofing. One would be to say we're decoupling the Seventh Amendment from the Article III inquiry, and we're going to recognize a new class of suits where Article III would let you give it to an agency, but the Seventh Amendment still requires a trial by jury. There, I think such a rule might be limited to civil penalties because the other remedies are equitable. But, if you go in the other direction, which some of my friends have suggested and some of the questions have suggested, and say anytime you have an administrative action that affects private property or liberty or anything else, that's public rights, that means that under Article III it can't go to the agency to begin with.
Justice Barrett: Yeah, I agree with you there. Okay. Thank you, Mr. Fletcher.
Chief Justice Roberts: Justice Jackson? Official
Justice Jackson: So I agree that Atlas Roofing resolves this case, but like many of my colleagues, I guess I don't understand your reading of Atlas Roofing as suggesting there's no Seventh Amendment issue at all if the fact-finding function is assigned to the agency. I mean, the case begins, sentence one, the issue in this case -- in -- in these cases is whether, consistent with the Seventh Amendment, Congress may create a new cause of action in the government for civil penalties enforceable in an administrative agency where there is no jury trial. You seem to say, well, it depends on whether Congress has assigned resolution of this to the agency. But that seems totally conclusory and circular to me. And I think the question is, when does the Seventh Amendment prohibit Congress from assigning it to the agency as opposed to giving it to an Article III court? You say that's forum-dependent, but -- but the -- the question is, when can they give it to one forum versus the other? And in my view, the Seventh Amendment and what Atlas Official 1 Roofing is saying is that it's -- it's claim-dependent. It's the part of your argument where you talk about is this a situation in which Congress is taking a common law duty, right, action, or whatever and moving it into the administrative process? And so the Seventh Amendment says you can't do that. If a person has a common law right of fraud, right, the common law creates duties like the duty not to make a representation that people rely on to their detriment. And it's established a right of action in private parties to enforce that duty. They can come to court. And the Seventh Circuit -- the Seventh Amendment says, when you have such a right to enforce that duty, you are -- by the Constitution, you have -- you -- you have the ability to come to court. The government can't make you go to some administrative tribunal and have no jury. All right? But there are also other duties in the world. Those duties can be created by statute, right? They're not common law duties. And when you have a new duty -- Atlas Roofing many, many Official 1 times talks about this being a new statutory duty that has been created. When you have a new duty, the Seventh Amendment isn't implicated.
Brian H. Fletcher: Justice Jackson, that's just not right. If it's a new duty --
Justice Jackson: Okay.
Brian H. Fletcher: -- that's enforced in court, even statutory rights enforced in court can trigger Seventh Amendment rights.
Justice Jackson: No, I understand, but the -- but Atlas Roofing also speaks to that. It says Congress can choose to allow you to enforce or allow the government to enforce this new duty in court versus the administrative proceeding, and when it chooses court, then you have the Seventh Amendment right.
Brian H. Fletcher: Right.
Justice Jackson: But, if it chooses -- I think your choice comes later in the analysis. If it chooses administrative action, it is enforcing a statutory duty. The Seventh Amendment isn't implicated. And there we are.
Brian H. Fletcher: So I think we're saying the same thing. And I -- the only place I might differ is that in that, if the -- if Congress Official 1 chooses the administrative forum instead, we think there's an Article III inquiry there where you have to ask does Article III let Congress choose the administrative inquiry.
Justice Jackson: That's fine. But Atlas -- I couldn't find Article III in Atlas Roofing. It's not talking about that aspect of the analysis. It's, I thought, talking about when Congress at the beginning creates a new statutory duty, and in this case, it's the duty not to, what, employ any device, scheme, or artifice to defraud in the context of securities transactions. There's a new statute, you've got this new duty, Congress says there it is, and we're giving it to the government to enforce this for the benefit of the public. All right? That's the beginning.
Brian H. Fletcher: Mm-hmm.
Justice Jackson: In that situation, does the Seventh Amendment kick in? I think Atlas Roofing says no, because we're not talking about a situation in which Congress has alternatively said any common law fraud claim out there in the world concerning securities has Official 1 to now be brought in this administrative action. If you're relying on the common law and you're bringing this kind of claim, you don't get a jury trial anymore. You have to come before the SEC. That's a Seventh Amendment problem because we're steal -- do you understand what I'm saying?
Brian H. Fletcher: Mm-hmm.
Justice Jackson: The -- it's -- so it's a suit at common law because you have the common law claim that is now implicating the Seventh Amendment right. But it's not a suit at common law when Congress creates a new duty and gives it to the SEC or some agency to enforce.
Brian H. Fletcher: Through administrative proceedings.
Justice Jackson: Through administrative proceedings.
Brian H. Fletcher: Yes. Yes. Then we're landing in exactly the same place, yes. And I think I may just be baking in some additional hoops that Congress has to jump through, but I -- I'm not disagreeing with your bottom line.
Justice Jackson: All right. And -- and I think the problem then is that if I'm Official 1 right about this, then I think it solves a lot of the concerns that my colleagues have about Congress shifting into, you know, a -- you know, certain things into administrative proceedings because, really, the Seventh Amendment is only implicated if they're shifting into administrative proceedings things that were suits at common law, meaning claims at common law. They're -- they're stealing from the private person who's protected by the Constitution that right, right?
Brian H. Fletcher: Yes.
Justice Jackson: Thank you.
Chief Justice Roberts: Thank you, counsel. Mr. McColloch. ORAL ARGUMENT OF S. MICHAEL McCOLLOCH ON BEHALF OF THE RESPONDENTS
McColloch: Mr. Chief Justice, and may it please the Court: Congress has steadily expanded the SEC's authority over the past several decades and now, like a house that's been added onto too many times, it's -- it's crushing the original Official 1 foundation. For the Seventh Amendment, that foundation was set in 1791. The founders thought that they had enshrined this right for government claims against citizens' property rights, still stinging from the Stamp Act and the abuses of the vice admiralty courts. My friend's really radical position is antithetical, totally antithetical, to the founders' intent. The jury trial right should apply especially when the government is coming after a citizen for penalties on a common law claim. The SEC's position really fares no better under the public rights doctrine. The basic claims -- these basic fraud claims are litigated privately among private parties every day, same claims, same statutes, and they've been litigated -- the same basic claims have been litigated for centuries. These underlying claims do not suddenly morph into public rights claims just because the government happens to stand in as the -- as the proxy plaintiff. You'd be surprised to hear this from Official 1 our briefing, but we don't think you need to overrule Atlas Roofing. Atlas Roofing actually, as modified by subsequent decisions, provides a useful template for analyzing at least the public/private rights analysis and leads to the same conclusion that Mr. Jarkesy was entitled to -- to a jury for these claims. And, by the way, it's pronounced Jarkesy, not -- not a number of other ways that it -- that it's been pronounced by -- by many. The -- the bottom line is these claims can't be considered peculiarly suited, uniquely suited, for summary agency adjudication when the SEC's been trying these same claims in real federal -- Article III federal courts for decades. It doesn't make any sense. And even if they could, the Article I assignment was not -- was not the SEC's to make. It's a quintessential legislative power, as this Court has -- has held, and it doesn't convert into executive power just because it's exercised by the executive, which is essentially their argument. And, finally, the -- the structural error of the Take Care Clause is a -- is a -- is Official 1 a clear violation. We all agree that the ALJs at the SEC are constitutional officers, and we all agree that they're protected by at least two layers of for-cause tenure protection. Mr. Jarkesy's entitled to vacatur. Be happy to take your questions.
Justice Thomas: You seem to read Atlas different from the government, and it seems as though you have a polar opposite position from the government. Would you spend some time on what the differences are in your view of Atlas?
McColloch: Yes -- yes, Your Honor. So, you know, if you read Atlas Roofing carefully, it -- it -- I could give you a list of several things that were, I think, very wrong about it, most of which have been addressed and more or less corrected by -- by subsequent decisions. But, in Atlas Roofing, it's -- it's helpful to realize that the Court right before it discussed the -- how -- how the OSHA claims are new and how different they are, the Court discussed a decision seven years earlier, Ross Official 1 v. Bernhard, where the Court held that a shareholder derivative action against directors and third parties under one of the securities acts, the Investment Company Act, which prevented larceny, embezzlement, misrepresentations, the same exact claims that are alleged in this -- in this case here against Mr. Jarkesy, back then, under the common law, a shareholder derivative action had to be in a court of equity. So you don't get a jury in a court of equity. We'll get to the -- the -- the forum impact later. We'll address that in a few minutes. But the Court held that because the real plaintiff in a shareholder derivative action is the corporation, the corporation, if it took these claims to court, it was I think against Lehman Brothers for fraud, if they took these claims to court, then the corporation would be entitled to a jury. And so, therefore, because the underlying claim belongs to the corporation, the underlying claim is a private one. The underlying claim -- the real victim was the company, so they're entitled to a jury. So the Official 1 -- the Court juxtaposes that. You look at the nature of the claim versus the elements of these OSHA claims. Now the OSHA -- and this gets really right to the heart of what the problem here is. OSHA created a number of brand -- brand new -- the Court used the word "new," I think, 11 times in that decision -- used that to describe these -- these regular -- very -- a lot of minutiae, very precise regulatory requirements, such as what Atlas Roofing got penalized for, I think, $600 for improper placement of a roof or a ceiling cover. So these were not claims that ever existed at common law. And those claims --
Justice Kagan: But, Mr. McColloch --
McColloch: Yes.
Justice Kagan: -- if I could interrupt you for a second. I mean, I have to say you're sort of describing a case that I don't recognize. Atlas Roofing says numerous times, it could not have been clearer, the Seventh Amendment is no bar to the creation of new rights or to their enforcement outside the regular courts of law. That's one statement. Official 1 Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevent it from committing some new types of litigation to administrative agencies with special confidence. That's another. There's another. There's another. There's another. I agree with you it says "new claims." We can talk about what "new claims" is. But it could not have been clearer that -- that what they were saying is that the Seventh Amendment was no bar to Congress making a decision that certain kinds of claims were best adjudicated in administrative agencies.
McColloch: Yes, Your Honor, and -- and I think we're -- we're pretty close actually. So maybe the -- the -- the dispute is over what "new" is.
Justice Kagan: If we're pretty close, because I think that just resolves the case.
McColloch: No.
Justice Kagan: That's the issue. (Laughter.)
Justice Kagan: I mean, that's the issue. That's the result. Official
McColloch: Well --
Justice Kagan: Seventh Amendment is no bar.
McColloch: Well, and -- and, respectfully, Your Honor, for several reasons, that -- that's where we very much part -- part ways, so -- (Laughter.)
Justice Kagan: I thought that that was going to be true. (Laughter.)
McColloch: -- that -- that and the -- the reason is these -- these -- these -- the -- the Court left aside traditional wrongful death and negligent claims, which is -- which the Congress had found that was -- those -- that litigation was insufficient to protect factory workers and other people in the workplace. And so Congress said we're going to create these new regulations --
Justice Kagan: Now we are close.
McColloch: -- all -- all these new duties.
Justice Kagan: I think that that's exactly right. I think that the OSH Act was -- Official 100 I mean, it -- it didn't -- the holding was not dependent on this necessarily, but -- but OSH Act says, look, there were ways to proceed against these kinds of employers in federal court. You could bring a negligence suit. You could bring a wrongful death suit. But, the Court says, Congress thought that wasn't enough. Congress thought you shouldn't have to wait until the injury happens. And so Congress gave power to OSHA under the OSH Act in order to bring claims for all kinds of workplace safety issues before a death took place, before an injury occurred. And that's exactly what the securities laws do. It says we don't need an injury. We don't need reliance. We're constructing a prophylactic scheme, and we're constructing it because we understand that the securities markets need to be honest and fair and people need to be able to rely on them. And so it takes a common law suit and says we're going to throw out some of these elements and we're going to create a prophylactic way to make the securities markets fair and put it in an administrative agency. Exactly what OSH Act Official 101 did.
McColloch: Okay. Your Honor, the -- the -- okay. So the -- the word "prophylactic" is -- is a useful one, as -- as my friend --
Justice Kagan: It's a big word. I mean nothing by it other than we're not going to wait for the harm to occur.
McColloch: Correct. And those -- we have -- we have no problem with those being declared public rights, those being tried in administrative forums where -- where -- without -- without the right to a trial by jury. Those prophylactic claims were never recognized in the courts of England in the late 18th Century. So what -- what the Court in Atlas Roofing did, after contrasting from Ross v. Bernhard what a true private claim is, what a private rights claim is, the Court in Atlas Roofing said we'll leave these -- this -- this traditional litigation aside, we're going to create the prophylactics, the prophylactics can go to an Article I forum just -- and -- and they didn't destroy or eliminate the wrongful death and negligent actions. Those -- those are still Official 102 there. They're still there today.
Justice Kagan: And Atlas Roofing says that is perfectly fine to do. It is perfectly fine. You have these -- these suits that can go forward in federal court, but that's not enough to solve the problem, Congress thought. And -- and -- and -- and Atlas Roofing says we respect Congress's decision that that's not enough for wrongful death suits to go forward in federal court. We're going to set up an agency. We're going to empower the agency, Congress says, to do things even when there is no harm, to do things that -- you -- to -- to adjudicate disputes that you couldn't adjudicate in a federal court. And Atlas Roofing says the Seventh Amendment poses no barrier to that. The end of this case.
McColloch: And I think -- and the reason, Your Honor, respectfully, it's -- it's not the end of this case is -- is -- is twofold. Number one, the -- the -- the -- the charges against Mr. Jarkesy were for traditional fraud with harm, with damages, which is what he was penalized for, what Patriot28 was -- was ordered disgorgement for. Official 103 So the -- the -- the charges, the allegations in the order instituting proceedings and -- and -- and in the final order of the Commission were traditional fraud claims --
Justice Jackson: No, I'm sorry. By -- by -- by nature or were the -- was that the actual cause of action? Because, for me, that matters. Was the government coming in and saying the cause of action here is traditional fraud? Is the -- is -- we're relying on the common law cause of action to be bringing this claim against Mr. Jarkesy?
McColloch: They brought it under the 10b-5 statutory provisions that --
Justice Jackson: Right. So they were bringing the cause of action under the statute that they had -- that Congress had created, right?
McColloch: Yes, Your Honor, but -- but with actual harm alleged.
Justice Jackson: No, no, no, I understand. The allegations may overlap with a fraud claim. They could have chosen the common law as the cause of action and brought a common law claim, but I think, if they had done that, Official 104 the Seventh Amendment would say you have to do that in the -- you know, a regular court. But, instead, what they said is we're going to do the cause of action that exists under the federal statute that creates this new right, and per Atlas Roofing, the Court says there's no Seventh Amendment barrier to them bringing that claim in an administrative agency rather than the court.
McColloch: And what this Court has held repeatedly is that that is not a new right. If you -- and -- and I come back to Granfinanciera, probably the -- the best explanation of this. This Court rejected the taxonomic change, taking a common law right, putting it into a statute -- statutory scheme, mixing it in with a bunch of public rights, and it's maybe changed a little bit, but what this --
Justice Jackson: But wasn't it --
Justice Barrett: Yes --
Justice Jackson: Go ahead.
McColloch: -- this Court --
Justice Barrett: I --
McColloch: Yes, Your Honor.
Justice Barrett: Sorry. I was just Official 105 going to say, but Justice Jackson's asking an important question here because we pointed out in our discussions with Mr. Fletcher that our cases have not been very clear about how to distinguish public from private rights. And if I understand you correctly and if I understood your brief correctly, you're really saying that the distinction depends on whether this was a right at common law, and, here, this bears a lot of resemblance to a right at common law, the -- the fraud.
McColloch: Yes, Your Honor.
Justice Barrett: Am I right? Okay. So -- but I think part of what your colloquy with Justice Jackson is showing is that this isn't exactly fraud, and it can be kind of difficult to say is this just like -- I mean, it doesn't have to be an exact match, but how close is this to the common law tort of fraud? So what kind of a test would you propose for deciding whether something represented that common law right? I mean, Mr. Fletcher's test has the virtue -- it -- it's very broad, but it has the virtue of being a pretty bright line. Official
McColloch: Yes. So this Court has held that a -- a -- a claim that serves the same essential function as a traditional common law right is -- is -- is a private right.
Justice Barrett: Does that solve Justice Kagan's problems? Because couldn't you say that the OSHA Act did that? You know, protected -- served kind of the same functions as -- as negligence and wrongful death suits?
McColloch: It does not serve the same function. It's -- it's more -- it's -- it's addressing more --
Justice Barrett: It's prophylactic.
McColloch: -- prophylactic and inchoate conduct that leads up to actual harm. So they're -- they're really addressing two different things. And just like in the -- in the securities acts with what Mr. Jarkesy was charged with, the -- 95 percent of what's in the securities acts are not traditional common law claims. The things that the SEC enforces every day, almost all of it is public rights --
Justice Barrett: So insider trading, can that go to the administrative agency, or does that have to go -- Official
McColloch: Insider trading is -- is prosecuted under the traditional fraud claims. Again, the -- the fraud sections in 10b-5 are -- and -- and they -- they were taken out of -- as -- as our -- our brief explains, they -- they were drawn largely from what was -- what -- what -- what common law fraud, how it was litigated at the time in the 1930s. And it was always a scheme, artifice, fraud, or misrepresentations, and that is -- those are the sections under which insider trading cases are -- are -- are prosecuted.
Chief Justice Roberts: How broad --
Justice Sotomayor: Could -- would -- I'm sorry.
Chief Justice Roberts: I was just going to ask how broadly your theory reaches beyond the SEC. I mean, does it cover tax deficiency proceedings?
McColloch: No, Your Honor. So, the -- you know, there are certain things we -- again, we get into this definition, and part of why we have a problem with or we've -- we've pointed out to the Court our concerns about joining at the hip the public rights doctrine Official 108 with -- with Seventh Amendment rights. But, you know, the -- you get into what's the definition of -- of public rights versus private rights, and, first of all, by -- by default, claims are private rights. The public rights is -- is called, as this Court has called it, the public rights exception. But things -- things that are -- are -- are or of or belong to the government, there are claims that are between an individual and the government only. So customs, immigration, benefits, franchises, permissions, debts to the government, I would put taxes under debts to the government, and so there are things that were traditionally, like customs, were always handled even back 240 years ago, were handled outside of -- of Article III, out of -- out of -- outside of courts. So there is -- there's that -- that limited universe of things that are between an individual and the government, but just, again, Granfinanciera I think resolved this and took a big bite out of Atlas Roofing when it rejected taxonomic changes, taking a common law claim, Official 109 throwing it into a statutory scheme like a tossed salad with a bunch of -- a bunch of public rights inserted, most of them prophylactic, and -- and then claiming, well, as to that private -- as to that private rights claim, it was private right, now it's public. And maybe we've reworded it a little bit. Maybe we've added a section here or there. We've got --
Justice Kavanaugh: Mr. Fletcher says that that's only as to cases between private parties, however. So how do you respond to that?
McColloch: Okay. And -- and -- and so this Court or -- this Court has not yet -- this is a matter of first impression in this precise context. Atlas Roofing was the last case that kind of dealt with this issue where it's an enforcement action by -- by the government. But the Court has made crystal-clear that it does not matter who the -- the -- the -- the parties are. The Seventh Amendment right is based on -- or back -- back up. Private rights are based on the Official 110 underlying -- the nature of the underlying claim, not the forum that the case happens to be filed in or adjudicated in and not who the parties are.
Justice Kagan: See, Mr. McColloch, I think that that's not a -- a right reading of our precedent. I mean, what has happened since Atlas Roofing -- we've actually never had since Atlas Roofing another, if you will, public/public case, where -- public/private case, where there's a government entity on one side of the "v," and the reason that we've not had those in 50 or 60 years is because those have been thought the easy cases. What have been thought the hard cases -- Northern Pipeline, Schor, Granfinanciera, Stern, Oil States -- these are all private people on both sides of the V, and, nonetheless, we've held that public rights might be involved because their disputes are embedded in federal statutory schemes. So those are the hard cases. But we've never suggested that in a case where Congress has given an agency the power to enforce something and the agency is -- is Official 111 bringing the charge, if you will, that -- that -- that -- you know, that that's just not -- it's -- that's settled.
McColloch: Well, it -- it -- it's settled only to the extent no one's brought it up and forced this issue since Atlas Roofing in this --
Justice Kagan: I agree.
McColloch: -- in this context.
Justice Kagan: Nobody has had the, you know, chutzpah -- (Laughter.)
Justice Kagan: -- to quote my people, to bring it up since Atlas Roofing.
McColloch: And -- and -- and, here, again, I want to come back to -- to the Seventh Amendment for a minute because we -- we do get bogged down in public rights/private rights Article III, as my friend -- friend has -- has said that -- that the -- the Seventh Amendment is subservient to -- to Article III considerations and -- and congressional -- the vagaries of congressional decisions to assign something to Article I or Article -- Article III, which they can only do for -- for -- for Official 112 public rights. But the -- you can't read many of the -- through the archives of the -- of the founders and the federalist and the anti-federalist writings and not come away with the conclusion that their concern -- one of their -- arguably, the primary concern certainly of the anti-federalists, who won the debate over the Seventh Amendment, was to protect from jury-less courts adjudicating matters that existed at common law for penalties against citizens.
Justice Jackson: Exactly, Mr. McColloch. And so I'm asking, why isn't the reason that the private/private cases are hard because the Court is concerned that what might be happening is Congress is shifting things that were traditionally common law claims adjudicated between private people into this administrative process and not people -- giving people trials by juries? Like, what makes it hard is when a statutory scheme looks like it could be displacing the normal common law private-to- private enforcement of a fraud claim. Official 113 But I think what Justice Kagan is saying is that the reason why these cases, the ones in which the statute is giving the enforcement authority to the government for the benefit of the public, is -- are not hard and why people haven't continued to bring these is because it doesn't look anything like the common law scenario where we've had two private parties fighting over fraud and they brought it to court. Instead, Congress has created a new thing to supplement that private scenario or maybe it's brand new in any event, but it doesn't -- it's not a common-law-rooted kind of thing that is being brought in court -- I mean, sorry, brought in the administrative agency with all the concerns that many of my colleagues have raised.
McColloch: Okay. Well, there are several issues there. I'll -- I'll try to remember them and -- and address them -- them all. And -- and all -- all good points, but keep in mind that the common law claims that -- that were incorporated into the securities acts are, in fact, litigated privately. Official
Justice Jackson: No, they're just -- there -- there -- there's a parallel claim. There's the world that existed before, so a person who's injured by this kind of misrepresentation in their securities portfolio or whatever still has the common law scenario, they can go to court, bringing a fraud claim, right? I think this actually hurts you and your analysis. The fact that those still exist mean that Congress was not trying to take those over, shift those away. Congress created a new right, a new opportunity for the government to come in and for the benefit of the public make, yes, admittedly, a similar kind of claim, but I think you have to admit this is a new cause of action, right?
McColloch: Well, I do not agree with that.
Justice Jackson: Okay. All right. So that's where we diverge.
McColloch: If you go back -- if you -- if you -- if you -- if you look at fraud claims as litigated in the 1800s and early 1900s and even today, basic fraud cases, they -- they Official 115 cite -- they -- they use the scheme or artifice to defraud, misrepresentations, violation of -- all of -- all of -- all of these issues that are litigated just in state courts today for fraud are litigated --
Justice Kagan: But, in state courts, there's always -- sorry, I'm over here. (Laughter.)
Justice Kagan: There's always a requirement of reliance, there's always a requirement of injury, there's always a requirement of scienter. Some of these securities acts do not require scienter. Some of them do not require reliance or injury. These are different kinds of causes of actions put in a different place with a different party on the other side of the "v."
McColloch: And the mere fact that they've been modified a bit is --
Justice Kagan: A bit? No scienter? No reliance? No injury?
McColloch: Well, in -- in this case, he was alleged to have had scienter. He was alleged to have committed all of the terms of common law fraud that -- that -- in -- in Official 116 this case. And our argument from the beginning has been that the -- the actual claims made against Jarkesy in this case are common law claims that -- that required a right to trial by jury under the Seventh Amendment.
Justice Sotomayor: But that wasn't what the government had to prove. Over here, counsel. To -- right here, counsel.
McColloch: Yes.
Justice Sotomayor: I have the mask on. Can I back up a second? Mr. Fletcher pointed out that civil penalties were more recently added to the administrative process. If this law had been -- if this case had been heard previously, the SEC could have sought simply a cease-and-desist letter from doing whatever they were doing, an injunction, asked for disgorgement, which Justice Barrett pointed out was always a -- not a jury trial matter, and an injunction from doing certain things -- other things in the securities industry. If that had been the -- the administrative process and the only thing the SEC had asked for, would your argument be Official 117 identical, that that -- they had to go to court to ask for those things? If this is a common law fraud claim, but the only remedies they're seeking are common law remedies that don't require -- never required a jury, are you taking the position they had to go to a court nevertheless?
McColloch: And -- and, Your Honor, your -- I think your question is -- is asking both under Article III and under Seventh Amendment. Seventh Amendment, no. We would not be arguing there's a Seventh Amendment right for equitable relief. Remember, the -- the -- the -- the test is was it a common law -- was it a claim recognized in the courts of England in 1791? And, number two, was it seeking legal as opposed to other relief, mainly equity or admiralty? And so a -- a claim for just disgorgement at least under the law as it existed until 2021, as this Court held in the Liu case three years ago, disgorgement is an equitable remedy, and this Court went back to look at the law pre-future equity --
Justice Sotomayor: So you're saying they didn't require a jury trial, but that Official 118 doesn't answer my first question. Would Article III have required --
McColloch: Article III.
Justice Sotomayor: -- judicial adjudication?
McColloch: And I believe Article III would require that. The Seventh Amendment, though, would not.
Justice Sotomayor: All right. So you're basically going to that broader point that -- you're actually asking for that fundamental change that Mr. Fletcher talked about. You're saying any action has to go to federal court if it has an analogue in federal -- in common law.
McColloch: Yes, Your Honor. Yes.
Justice Sotomayor: Quite dramatic.
McColloch: And we believe that's --
Justice Sotomayor: I -- I'm not quite sure why that holding, which at common law included things -- like your own brief goes on and on about this, that if it was a deprivation of life, property, or -- life and property, you had to go to court. Official 119 I don't know why immigrant -- immigration issues don't have to go to court under that theory, why customs duties don't have to go to court, why any of the other things that you're exempting out wouldn't have gone to court. They all involve money.
McColloch: They all involve money, but there are certain things that have been traditionally litigated or -- or adjudicated or assessed outside of the court process even back at the time of the founding. And so those -- those -- those are just this unique --
Justice Sotomayor: That's a very -- that's a very amorphous line. I'm --
Justice Barrett: Well, and -- I'm sorry.
Justice Sotomayor: I'm sorry, just one last question.
Justice Barrett: Yeah.
Justice Sotomayor: I'm assuming, when we're being asked to change laws, we usually have a section saying stare decisis shouldn't apply here. The dramatic change that you're proposing in our approach and jurisdiction is Official 120 going to have consequences across the board. We're going to have to decide questions like the one you assume, that that long list is exempt, but we're going to have to decide whether that's true, and we have a series of other agencies with very big responsibilities, start with the EPA, start with the -- the Commodities Commission, the Postal Service, that can assess penalties for transporting hazardous materials in interstate traffic. All of those agencies will have to -- will have to go to court, correct?
McColloch: Well, Your -- Your Honor, I -- I think we're --
Justice Sotomayor: All of their proceedings are now nullified under your theory?
McColloch: I -- I think that we -- we are not arguing for a big change in the law. We -- we --
Justice Sotomayor: I -- you've just said any -- any suit that seeks civil penalties that has an analogue and not an exact duplicate but an analogue in common law has to go to federal court.
McColloch: Well, that's what this Official 121 Court has held many times going back 200 years, and so --
Justice Sotomayor: For private -- for suits.
McColloch: But there are certain things that have been deemed exempt from that under, again, another long strain of cases, such as immigration, tax, et cetera, that -- and -- and Social Security is like the easiest example. The Chief Justice asked a little more difficult question about, you know, public health benefits, but there's a long tradition of Social Security. That's a government benefit. You know, what the government giveth, it could taketh away. It can -- and it can -- it can adjudicate. And so those are just different. This -- the argument we're making affects a tiny percentage of the total things that are handled -- that are -- today are adjudicated administratively.
Justice Sotomayor: Should we take --
McColloch: We're only --
Chief Justice Roberts: Thank you.
Justice Sotomayor: -- do we take you at your word, or should we have asked for Official 122 briefing on the consequences?
McColloch: Well --
Justice Sotomayor: You didn't brief it. Some amici tried to, but it wasn't briefed.
McColloch: Well, and -- and -- well, and --
Justice Sotomayor: It wasn't briefed by the government. It wasn't briefed by you.
McColloch: And -- and if -- if the Court wants supplemental briefing, we'd be happy to -- to offer a supplemental briefing. You know, we would, first of all, strongly prefer that the Court deem the public/private rights doctrine more or less irrelevant to -- to -- to the assessment of or evaluation of the applicability of the Seventh Amendment. We believe that the subsequent cases have done that and -- and not just Granfinanciera. This -- this Court was very helpful in -- in -- in Stern v. Marshall in laying out descriptors of things, what -- what are really private rights. You know --
Chief Justice Roberts: Thank --
McColloch: -- this is an Article III case. Official
Chief Justice Roberts: Yeah, thank you, counsel. I'd -- we've just been talking about areas that aren't covered, and you've mentioned a couple here and there. I wanted to know if you can give us -- I realize it may not be completely, I'm not holding you to this -- but a list of the areas that you think would not fall within the arguments that you're making today. You've mentioned taxes. You've mentioned duties, Social Security benefits. Are there others that you would like to add, or maybe you can refer us to some place where you have a full list?
McColloch: You know, immigration. There -- there are a number of areas. And it would probably be a -- a pretty long list of things that wouldn't be affected. Things -- again, the -- the best example is the OSHA regulations. Proper placement of -- of ceiling covers, you know, those -- those kinds of things that are subject to sort of traffic-ticket-level fines just are not things that were ever recognized at common law. And most of the things that the Official 124 Article I courts throughout the federal government do are, in fact, new claims that are regulatory issues, that don't have an analogue in 18th Century English practice. And so we're only talking about a tiny percentage. And -- and, really, here, we're just talking about fraud claims, traditional fraud claims, and at least where they've been charged as traditional fraud claims, that -- and -- and I know it's kind of -- the Court's going to be a little concerned, do we have to do case-by-case-by-case-by-case analysis of this? Well, unfortunately, for most things, you have to do a case-by-case analysis. The -- the whole public/private rights doctrine is frankly a mess. It's not the Court's fault. It's because it's so -- it's a very difficult, vexing issue. And -- and this Court has declined actually to specifically define it itself. And maybe that's what you're asking us. And so I don't mean to punt on the question, other than to say we're not asking for a big change in the law. And, you know, may -- maybe the -- we're -- we're a little bit talking Official 125 past each other. We're just saying when a -- when a -- a -- a common law claim or something approximating the -- the same purposes of a common law claim that existed 200 years ago in England, that is -- is thrown into a statutory scheme, that that still requires the right to trial by jury, just like in Granfinanciera. It was in an Article I bankruptcy court, and the Court held even -- they left -- this Court left alone whether or not that Article I assignment was okay. They left that alone and just sort of, okay, let's assume it is. We're still going to say for this fraudulent transfer claim that was a core proceeding incorporated into the statutory scheme, we're saying you've got a right to trial by jury for that.
Chief Justice Roberts: Thank you, counsel. Justice Thomas? Justice Alito?
Justice Alito: Excuse me. Could you complete this sentence for me? A statutory claim is sufficiently close to a common law action for Seventh Amendment purposes when it?
McColloch: Serves the same Official 126 essential function as a common law action recognized in the courts of England in 1791.
Justice Alito: Serves the same essential function?
McColloch: Essential function.
Justice Alito: And why would that not be true here?
McColloch: Well, it -- these fraud claims do serve the same essential -- in the securities acts, under 10b-5, do -- do serve the same essential function.
Justice Alito: I'm sorry. Why -- why is that the same here?
McColloch: Why is it the same?
Justice Alito: Yeah. I'm -- the --
McColloch: Because it has all of the elements --
Justice Alito: There was an erroneous "not" in there. Why is it the same?
McColloch: Why isn't it?
Justice Alito: Why is it?
McColloch: It is. It's the same -- it's -- it's -- it's the same because it has all the same elements. There -- there were -- there were cases back in 18th Century England Official 127 that were securities-type cases, fraud cases. There was one case that we cite in our brief that was rendered King v. Cawood in 1790, the year before the Seventh Amendment was enacted, where the government civilly prosecuted for penalties Mr. Cawood for violation of a financial fraud -- a financial statute. So this -- this is a fraud claim. They allege misrepresentations. They allege -- they allege reliance. They allege materiality. And they allege damages.
Justice Alito: Well, were they required to allege all those things?
McColloch: They were not necessarily required to, but they did, and they usually do.
Justice Alito: Do -- could we decide this case on the narrow ground that the statutory securities fraud claims are sufficiently close to a common law fraud action because the elements of the statutory claim are a logical subset of the latter?
McColloch: Yes, Your Honor.
Justice Alito: I know you think the public rights/private rights distinction is Official 128 fuzzy, but do you think it's a difficult question whether customs duties are public rights or private rights -- involve public rights or private rights? Same thing for immigration. Same things for taxation. Same thing for Social Security. Same thing for the Postal Service. Do you think that's a tough question?
McColloch: No, Your Honor.
Justice Alito: Then why is it necessary for us to jettison that inquiry?
McColloch: Well, I don't think you need to. I mean, I -- I think -- I think that inquiry -- that -- that's been well settled. Plenty of cases allowing immigration, customs, all of those areas to be -- to be adjudicated administratively by the executive branch and, again, were -- were done back in the -- most of those done back in the -- in the 1800s --
Justice Alito: Okay. Thank you.
McColloch: -- that way.
Justice Alito: Thank you.
McColloch: So it's a long tradition. Official
Chief Justice Roberts: Justice Sotomayor?
Justice Sotomayor: So explain your dividing line again. Serves the same essential functions as a common law right in suit? Can the government sue you without a statute for not paying your taxes?
McColloch: Without a statute?
Justice Sotomayor: Yes.
McColloch: No.
Justice Sotomayor: Can the government sue you for fraud under -- under the common law if you didn't have materiality, reliance -- and reliance?
McColloch: No.
Justice Sotomayor: Could they sue you in common law for fraud?
McColloch: If you defrauded the government.
Justice Sotomayor: Exactly. But they're not charging you here with defrauding the government. They're not claiming injury to the individual -- to other individuals. They're claiming that the injury is to them.
McColloch: The -- the SEC -- Official
Justice Sotomayor: To the government but not in terms of money.
McColloch: The SEC alleged in the -- the -- does allege in these cases in general and alleged here --
Justice Sotomayor: When you go into a private suit, other than a qui tam action where the government is letting you sue in their name, is the private individual recovering penalties for the government and its injuries to the securities market, or is it -- is it recovering penalties for the individual's own injury?
McColloch: In this case --
Justice Sotomayor: I didn't say this case. I'm asking you if a private citizen goes into court and seeks recovery under the SEC for a securities fraud, can they collect penalties on behalf of the government?
McColloch: No. In this case --
Justice Sotomayor: So what's the essential function that's the same in an action by the government and an individual?
McColloch: This -- the --
Justice Sotomayor: The elements are not the same. The remedies go to one party, not Official 131 the other. I -- I'm -- I'm at a loss.
McColloch: Okay, Your Honor. The -- the substantive elements are the same, which I think is the end of the inquiry, but to take it further, the SEC takes those penalties, according to them, they take most of the penalties and most of the disgorgement money that they take in and return it to the victims.
Justice Sotomayor: You know --
McColloch: And so --
Justice Sotomayor: -- that's -- that's very generous of the government, but it's not -- you know, I can give my money to charity, but it's not the Court's right to -- the Court doing that. It's the SEC choosing to do that.
McColloch: The SEC --
Justice Sotomayor: Just like the victim could choose and probably does give the government some of the money in taxation. I'm not sure if penalties are exempt or not.
McColloch: Well, and -- and sometimes courts frequently in these SEC fraud cases appoint receivers who are ordered by the court to collect money and return it to the -- to the investors. So -- but the SEC largely -- Official
Justice Sotomayor: Thank you, counsel.
McColloch: -- acts today --
Justice Sotomayor: Thank you, counsel.
Chief Justice Roberts: Justice Kagan?
Justice Kagan: Mr. McColloch, if you look at the history of the securities legislation in this country, a lot of it came into effect, of course, after the Great Depression, and then there were -- would have been two more recent tranches. One came after the savings and loan crisis, and the other came after the 2008 Great Recession, if you want to call it that. And each time Congress thought, you know, something is going terribly wrong here and people are being defrauded and people are being harmed. And these common law suits that you're talking about were not solving the problem. And Congress said: We have to give the SEC responsibilities. We have to give them powers. We have to give them greater authorities. And I guess what I'm wondering is when you say, well, we should go back to the Official 133 common law suits that were brought 200 years ago in the courts of Westminster, I mean, is Congress's judgment after the depression, after the savings and loan crisis, after the Great Recession, is Congress's judgment that more powers were needed within an administrative agency entitled to no respect?
McColloch: No, it's entitled to lots of respect. And, again, everything that the -- that the securities acts do and everything the SEC does we support. And it doesn't have -- it's -- it's not a matter of not respecting Congress. Congress acted appropriately, except insofar as they eventually in 1990 and then in 19 -- in 1990, when they allowed the SEC to sue people outside of -- of the regulatory universe, people that were regulated and registered, they gave them the authority to -- to come after any person and then, in Dodd-Frank in 2010, allowed them to get penalties against any person. They didn't really use that power against any person when they couldn't get penalties. And so, as soon as they got the penalty authority, that's when they could go after any person for Official 134 securities fraud. And our argument is, has been, and -- and I believe the Fifth Circuit's holding is that basic securities fraud allegations, whether they're inside or outside of a statutory scheme, the nature of the claim is private. The nature of the claim, it's just exactly the same. It's -- it's analogous enough to common law claims that existed in 1791 in England --
Justice Kagan: Thank you.
McColloch: -- and, therefore, the Seventh Amendment applies, period.
Chief Justice Roberts: Justice Gorsuch?
Justice Gorsuch: I just wanted to clarify a few things that I -- I found confusing. Under 10b-5, in addition to proving a material misrepresentation, I thought scienter was required statutorily, correct?
McColloch: Yes, yes, Your Honor.
Justice Gorsuch: Okay. And then I had thought that, as well, that for -- when they -- when the SEC seeks civil monetary penalties, it has to prove causation between the Official 135 defendant's conduct and a loss to persons.
McColloch: Yes, yes, Your Honor.
Justice Gorsuch: That's statutorily required?
McColloch: That's in the statute.
Justice Gorsuch: Okay. So those elements all match up?
McColloch: They match up very neatly, yes.
Justice Gorsuch: Okay. And I thought in Tull Justice Brennan made the point that there doesn't have to be a perfect common law analogue.
McColloch: The -- the common law analogue is a very low bar.
Justice Gorsuch: Okay. And I thought he said that the more important thing were the penalties sought, that you look at the common law analogue of the cause of action and -- and -- and the relief sought and where those -- and -- and he placed special emphasis on the second part.
McColloch: Correct, Your Honor. And that the main issue, the more important of the two elements was not the 1791 guidepost but Official 136 was -- was actually the -- whether or not the government's seeking penalties.
Justice Gorsuch: Thank you.
McColloch: And so it's all about, you know, if the government's seeking penalties, the -- the government is required to take the case, again, under all of the other elements we've talked about, it's required to take the case in front of a jury if the -- if -- if their target wants a jury trial.
Justice Gorsuch: And Congress is free to prescribe that and extend that and expand it any way it wants.
McColloch: Yeah.
Justice Gorsuch: It just can't take away a person's right to be heard before his peers.
McColloch: Correct. And for that matter, the SEC could fix this problem by itself this afternoon by giving people the option. The problem here is that it's mandatory. It's coercive. Most of the other cases, situations at other agencies, people have an opt-out or they can choose which -- which forum they go in. The problem here is that it's Official 137 coercive. And so the SEC gets to -- gets to unilaterally strip your Seventh Amendment and a number of other rights away. By choosing that forum --
Justice Gorsuch: Thank you.
McColloch: -- the SEC could fix that in a heartbeat.
Justice Gorsuch: Thank you.
Chief Justice Roberts: Justice Kavanaugh?
Justice Kavanaugh: Yeah. Two questions. For those cases that are covered by your rule, whatever the scope of that is, agencies, I think, under your -- your approach could still bring those same suits in federal court, so there would still be full enforcement of all the regulatory statutes, environmental, securities, what have you. But Mr. -- so I think I understand your point on that. But Mr. Fletcher says that's still a big problem because Congress would have to enact statutes that allowed agencies that don't have the authority to go to federal court to do so, and he says that would be a burden on federal courts. Official 138 And I just want to get any response you might have to that.
McColloch: If -- if -- if there's a -- if there's a common law claim for penalties embedded in some of those statutes, then the answer is yes.
Justice Kavanaugh: Well, that's not the question. The question is what's -- what -- what about the burden on federal courts that Mr. Fletcher raised, respond to that, and then the burden on agency enforcement for those agencies that don't have the authority to seek federal civil penalties in federal court now.
McColloch: I could -- I could speak most authoritatively to -- to -- to the SEC and what effect it would have there. The SEC, seeing the handwriting on the wall, has already, I believe, withdrawn or returned its -- its securities fraud cases back to federal court. So this whole notion of choking the federal courts with lots and lots of cases is -- it didn't happen because they've already been returned to the federal courts. Soon after they got this authority in 2010, it went way up, and then these constitutional challenges started Official 139 getting filed and it went back down. And so I don't think -- in fact, I think the -- the impact at the SEC if this Court upholds the Fifth Circuit on the Seventh Amendment will be zero. It'll be virtual -- virtually nothing.
Justice Kavanaugh: Okay. And then second question is, if you're asking us, as some of the questions suggest, to scale back, narrow a precedent of ours in order that an individual has a right to federal court rather than an in-house tribunal, before we do that, we should know that it's more than just housekeeping, that it matters. And you haven't really said, you know, it really matters to be in federal court rather than an in-house agency tribunal, and here's your opportunity.
McColloch: You mean it matters constitutionally or as a practical --
Justice Kavanaugh: No. No. Matters, like, you know, we could change precedent, but if it doesn't have any impact other than housekeeping of where you file your briefs, which tribunal you file it in, then, you know, that's -- that's a lot to ask us to narrow a Official 140 precedent --
McColloch: Well --
Justice Kavanaugh: -- for where you file your briefs. But does it matter?
McColloch: It -- it -- it matters --
Justice Kavanaugh: See, all right. It obviously does, but how and why and how much?
McColloch: It matters -- it matters quite a bit, you know, to -- even beyond the right to trial by jury, which -- which is the most important of the ramifications, but there's all kinds of due process issues. There are prejudgment issues embedded in this whole process. There are a number of -- we had -- we had two other issues that we raised in the Fifth Circuit that they just left behind because they thought they had bitten off enough with -- with these three issues that the Court granted cert on. So the -- and -- and if we did get back and if you rule against us on everything, we've still got -- they -- we've got civil --
Justice Kagan: More is coming? Official
McColloch: -- issues still coming. (Laughter.)
McColloch: So -- but we think the Court will uphold the Seventh Amendment right here, and the -- the difference between going to federal court -- and I've done both -- going to federal court and going to an administrative proceeding is stark. The -- the discovery rights are almost zero. The -- the Division of Enforcement gets a one- or two- or three-year head start on you. They then give you an 8-terabyte disk that you can't even search and say you're going to trial in three or four months, and -- and off you go. The Rules of Evidence don't apply. The hearsay rule doesn't apply except when it does. When we tried to get hearsay admitted, it was -- it was denied because the hearsay -- because of the hearsay rule, when -- when the Division of Enforcement tried to get and did get copious evidence into -- into the record, and we objected to hearsay, the --
Justice Kavanaugh: Okay.
McColloch: -- ALJ said -- Official
Justice Kavanaugh: Thank you.
McColloch: -- hearsay doesn't apply.
Justice Kavanaugh: Thank you.
McColloch: It makes a big difference.
Chief Justice Roberts: Justice Barrett?
Justice Barrett: I have a question about equitable remedies. So, when I talked to Mr. Fletcher about whether the SEC would still be able to get injunctive relief and disgorgement, because they're equitable remedies, Mr. Fletcher expressed concern that the Court, in deciding the Seventh Amendment question in your favor, might actually limit the ability of agencies to get equitable remedies. And then, when Justice Sotomayor asked you some questions about that, you said the Seventh Amendment would not stand as a barrier in that context, but Article III would. So, if we decided in your favor on the Seventh Amendment question, do you think that would necessarily resolve any kind of Article III question? And if not, why did you even Official 143 bring it up?
McColloch: Well, I -- I don't know that we did bring it up. It's just it's --
Justice Barrett: Well, you brought it up to Justice Sotomayor.
McColloch: Well, I -- I did. I thought that was part of her question. But what -- what I was -- what I was trying to say is, number one, the Seventh Amendment issue doesn't require the Court necessarily to resolve the Article III issue. We don't think that the Article III public/privates rights -- public/private right analysis is even necessary to resolve this case under the Seventh Amendment, which is the issue that was raised below, the issue that was ruled on below.
Justice Barrett: But doesn't it bear on it? Because, if you're looking to see what was a suit at common law, I mean, isn't that private right?
McColloch: I will say most of the time, 95 percent of the time, the analysis under public/private rights and the analysis under Seventh Amendment for whether it was a common law -- a claim that existed at common law is Official 144 going to come out the same. It comes out with the same result. And that's why this -- this construct has worked for the last 50, 60 years, and maybe no one's challenged it for -- for that reason. And that's why we're saying we can -- we can live with Atlas Roofing because Atlas Roofing properly construed and as it's been substantially modified by a number of subsequent decisions comes to the same result.
Justice Barrett: So is -- let's see. You said that on the Seventh Amendment question, our deciding in your favor would work a very small change?
McColloch: Yes, Your Honor.
Justice Barrett: But it sounds to me that what you're really hoping for deep down is a really big change because you want even the equitable remedies cases out of agencies too.
McColloch: We don't have --
Justice Barrett: Is that --
McColloch: -- a position on that. We -- because we're not here -- Jarkesy does not have an equitable remedy issue to -- to worry about. It's a -- we only raised a Seventh Official 145 Amendment issue, and it was because of the penalties, and it was because of Dodd-Frank.
Justice Barrett: Notwithstanding what you told Justice Sotomayor?
McColloch: Notwithstanding what I told Justice Sotomayor.
Justice Barrett: Okay. Thank you.
Chief Justice Roberts: Justice Jackson?
Justice Jackson: So I've heard you say several times that we can live with Atlas Roofing, and I'm trying to understand why, and I'm reading the part of Atlas Roofing where they're describing the past cases that they've -- that the Court is relying on. And it seems as though the basic proposition is, when Congress creates new statutory public rights, it may assign their adjudication to an administrative agency with which a jury trial would be incompatible without violating the Seventh Amendment's injunction that jury trial is to be preserved in suits at common law. All right. So I think that's the sort of basic proposition, and I understand your argument to be this is not the creation of a new Official 146 statutory public right.
McColloch: Correct, Your Honor.
Justice Jackson: All right. So Justice Sotomayor asks and Justice Kagan asked a lot of questions probing that part of this. And so your answer is, even though the elements are different, there's some overlap, as Justice Gorsuch points out. But are the elements of this 10b-5 action the same on all fours with common law fraud?
McColloch: Yes, as -- as -- as they were alleged in this case. Yes.
Justice Jackson: But I'm not talking about the allegations. I'm talking about the elements, what the government had to prove in order to establish a violation of 10b-5.
McColloch: They are substantially the same and certainly serve the same essential function as -- as a -- as a traditional --
Justice Jackson: Right, but --
McColloch: -- common law fraud claim.
Justice Jackson: -- but, in Atlas Roofing, we had the service of the same essential function of a tort claim. But Official 147 Congress -- the -- the Court here still said it was new statutory claim. It described the circumstances under which it arise -- it arose and called it new. So I guess I'm trying to understand why here, even though you're right, the allegations, one could have made perhaps a standard common law fraud claim out of the allegations, if the elements of the statutory claim are different, why are you suggesting that it is not new?
McColloch: Well, so I would push back on -- on the notion that the OSHA regulatory prophylactic claims sound in tort. They don't sound in tort.
Justice Jackson: Because?
McColloch: Because you don't have to have any injury. If -- if -- again --
Justice Jackson: Do you have to have injury here as an element?
McColloch: You do not have to have injury as an element, but to get damages, you do, so you don't get penalties.
Justice Jackson: No, I understand, but -- but as an element, right, you say the Official 148 OSHA claims didn't have the injury element. We don't have that element here either. So why are these claims old and those claims new?
McColloch: Be -- because those claims are -- again, they're so -- they're so prophylactic as to whether your ceiling cover is in exactly the right position, no one could sue in tort over that because there's no -- there --
Justice Jackson: Because the duty is arising out of the -- the -- the statutory --
McColloch: Only out of the statute.
Justice Jackson: All right. And the duty here is arising out of the statute in the same way, I think, but let me just ask you this. You keep talking about Granfinanciera, if I'm pronouncing it correct. I guess I'm a little worried about the rule that you're asking us to adopt insofar as it's suggesting that it doesn't have to be a common law claim that Congress has appropriated on all fours with all the elements. It can be something that is like a common law claim.
McColloch: Yes, Your Honor.
Justice Jackson: And I just don't Official 149 know where that comes from because the Granfinanciera case, it was the fraudulent conveyance claim. It was the sort of scary scenario in which Congress is moving actual common law claims into the administrative process or in -- in that case into the bankruptcy process, and the Court rightly said no, I'm sorry, you have a Seventh Amendment problem with doing that. So I -- I don't know that Granfinanciera gives you the rule that we have previously held that something that looks like a common law claim, even though it's statutorily new, raises the same kind of Seventh Amendment issue.
McColloch: Well, you know, so, really, what Granfinanciera stands for in this case is -- is, again, the condemnation of taxonomic changes and -- and it --
Justice Jackson: But it's only taxonomic if it's actually the same claim, right?
McColloch: It's --
Justice Jackson: I mean, if it's -- if it's the same claim on all fours and Congress Official 150 is just changing the name, then I get you. You -- we have exactly the problem that the Seventh Amendment is concerned about. What I'm still worried about is you're saying Congress can create a new claim, but as long as it looks kind of like a common law claim or it's substantially close, I -- I don't really know what the -- how close it has to be, but as long as it kind of looks like a -- a common law claim, the same Seventh Amendment concerns arise, and I don't know that we've ever said that before.
McColloch: And I think the Court has said that. Again --
Justice Jackson: In what case?
McColloch: -- the -- the same essential function test. Give me a moment, I can find you -- and I know we have cases in our brief that -- that -- that do cite that. And in Stern v. Marshall, which is one of the most -- one of the two most recent cases where the courts at least dealt with what constitutes private right versus public right, this Court gave sort of a -- a nice listing of about five examples of -- of how you can tell the Official 151 difference. And a private right says that the underlying claim for relief "does not flow from a federal statutory scheme, as in Thomas, or is not completely dependent upon adjudication of a claim created by federal law."
Justice Jackson: Thank you.
Chief Justice Roberts: Thank you, counsel. Rebuttal, Mr. Fletcher? REBUTTAL ARGUMENT OF BRIAN H. FLETCHER ON BEHALF OF THE PETITIONER
Brian H. Fletcher: Thank you, Mr. Chief Justice. I'd like to say just a quick word about removal and then talk about the Seventh Amendment issue. So, on removal, I just want to take it at a 30,000-foot level. I think the lesson from this Court's cases is -- is that removal is about accountability and control. And in Free Enterprise Fund, there was a real concern that the president regulated parties and the public wouldn't know whether or not the Securities and Exchange Commission actually supported the enforcement and policy Official 152 actions that the Board was taking or just had to tolerate those actions because of the strict removal protection. Now apply those same questions here and you get exactly the opposite results. Here, we know exactly what the Commission thinks about the ALJ's decision in this case because the Commission had the right to and exercised the right to conduct plenary review, adopt parts of it, and reject other parts of it. I think that's constitutionally adequate means of supervision of adjudicative officers. We think that's the lesson from the plurality opinion in Arthrex. Also, in Free Enterprise Fund, this Court said the most telling problem with the scheme it confronted there was its novelty. That's the through line of this Court's recent cases like Seila Law, like Arthrex, like Collins. No foothold in history or tradition is a telling constitutional problem. Here, it goes the other way. The removal protection for ALJs has been a central feature of administrative law since the APA. Official 153 Now, on the Seventh Amendment, obviously, the focus is Atlas Roofing. And I think my friend has to do one of three things. He has to distinguish it, he has to convince you that you've overruled it already, or he has to convince you that you should overrule it now. And I don't think he's done any of those. So, first of all, on distinguishing it, I think it's helpful to be very concrete about what was at issue in Atlas Roofing. The statute at issue there said, and I quote, "that employees had a right to be at a workplace free from recognized hazards that were likely to cause serious injury or death." What had happened was that one employer failed to shore up a trench and it collapsed and an employee died, and another employee fell through an open roof and died. Those things could have been the basis for wrongful death or negligence actions evaluated under very similar standards, and yet the Court had no problem saying that they were validly enforced through administrative proceedings because Congress had created a federal statutory scheme. Official 154 It has done the same thing here. The securities laws serve different purposes than the common law of fraud. Congress is not just taking and federalizing disputes between private parties adjudicated in courts of common law. I think the clearest indication of that is this Court's decision in Kokesh, which explained why the remedies that the SEC gets, even when they are monetary or compensatory, are not for private parties. They are remedies for a public wrong and they are therefore properly considered penalties. I think, for much the same reason, this is not the case where you have a concern about circumvention of the common law rights. I think the other thing that I would say is that he has tried to convince you that you've overruled Atlas Roofing already in Granfinanciera, but the parts of the opinion that he is talking about and, with respect, Justice Gorsuch, that you have quoted are about suits between private parties. When you talk about suits involving the government, Granfinanciera is explicit. It says, "even when Congress does something that is closely analogous," that's a quote from the Official 155 common law, or effectively supplants a common law cause of action with a new statutory cause of action enforced by the government, that is something that it can assign to an administrative tribunal. So, finally, that leaves him, I think, asking you to overrule Atlas Roofing in one way or another, on Seventh Amendment or on public rights, and I think there are several reasons not to do that. One is that my friend just hasn't asked. As Justice Sotomayor said, the words "stare decisis" do not appear in his brief. Even now, I don't think he has grappled with the practical consequences of adopting any of the rules that he has offered, and I also don't think he's given you a new principle to adopt. So I take the point, Justice Alito, about immigration cases and tax cases and customs cases. In some ways, those sound like public rights, but the cases involve the imposition of penalties, the requirement of private parties to pay penalties for violating those statutes. If you look at it from a private Official 156 party's perspective, that's private property just like the civil penalty here. The Seventh Amendment and Article III don't apply differently in the immigration space. When the government seeks immigration penalties in court, it has to do it in front of a jury. So the reason why the government can get administrative penalties in immigration cases and in those other cases is because that is not an invasion of Article III. It is not a violation of the Seventh Amendment. And for the reasons that the Court said in Atlas Roofing, the same thing is true here. So, finally, I would just like to say, you know, going back to this Court's decision in Brackeen last year, the Court said the parties before us have raised real concerns with our past precedent. They've made arguments based on history. But they haven't taken on the burden that we expect parties to take on when they ask us to overrule precedent. They haven't acknowledged what they're asking for. They haven't grappled with practice and principle, and so whatever those arguments might be in a Official 157 future case, we're not going to engage with them here. I think you should do the same thing today. I think you can reverse the decision below and uphold the Securities and Exchange Act's provisions at issue here without going one inch beyond Atlas Roofing. And I think a decision reversing the -- the Fifth Circuit on that basis would leave the law exactly where you found it today. Thank you.
Chief Justice Roberts: Thank you, counsel. Counsel. The case is submitted. (Whereupon, at 12:22 p.m., the case was submitted.)