The U.S. Supreme Court on the day the justices issued their orders in pending appeal cases on June 24, 2024 in Washington, D.C.
Nathan Howard | Reuters
WASHINGTON — Liberal Justice Sonia Sotomayor has criticized the Supreme Court’s conservative majority for its power grab, limiting the authority of federal agencies in a series of decisions, including one handed down Thursday against the Securities and Exchange Commission.
In her dissent, she said the ruling, which limits the SEC’s ability to enforce securities laws, is part of a “disturbing trend” in which courts have curtailed regulators’ powers.
She cited other recent rulings that made it easier for the president to remove the head of an independent agency and limited the power of internal judges.
“Make no mistake: today’s decision is a power grab,” Justice Sotomayor wrote. She went further, as justices do when they are particularly upset about a ruling, by reading her dissenting brief from the bench.
In a 6-3 decision Thursday, the court ruled that the SEC’s in-house judges’ decision to decide cases violated the right to a jury trial, a decision that could have implications for other agencies that use similar procedures.
The case is one of several the Supreme Court will hear this term over conservative and corporate-led attacks on the power of federal agencies, and the court’s 6-3 conservative majority is often sympathetic to such arguments.
Sotomayor pointed to the ongoing attacks on what critics call the “administrative state.”
“While litigants seeking to further dismantle the ‘administrative state’ have reason to celebrate today’s victory, those of us who value the rule of law have nothing to celebrate,” she wrote.
The challenge focused on how the SEC enforces securities laws, including insider trading bans, and has long led the internal process. The lawsuit is filed by an administrative law judge. The agency can also sue in federal court. Either type of lawsuit can seek monetary penalties.
Those subject to in-house arbitration have complained that the process infringes on their rights and gives the SEC too much power by essentially creating a home-court advantage.
Chief Justice John Roberts, in his majority opinion, hit back at Sotomayor, saying she was “allowing Congress to centralize the roles of prosecutor, judge and jury in the executive branch.”
Such an outcome would be “the exact opposite” of what the Constitution’s principle of separation of powers requires, he added.
Hedge fund manager George Jarkesy filed the lawsuit after the Securities and Exchange Commission allegedly violated securities laws by making false statements and omitting relevant information in communications with investors while overseeing two hedge funds.
Jarkesy and his firm were ordered to pay a $300,000 fine and were barred from holding certain positions in the securities industry after undergoing an internal proceeding in 2014. The firm was also ordered to repay approximately $685,000 in what the SEC deemed “unlawful benefits.”
Jahkessy’s legal battle was backed by billionaires Elon Musk and Mark Cuban.
A three-judge panel of the New Orleans-based 5th Circuit Court of Appeals ruled against the SEC, which asked the Supreme Court to intervene.
