Alexandria Winters (Fordham Law 2025) ELR Senior Staffer

This fall, the Supreme Court issued a decision in SEC v. Jarkesy, 144 S.Ct. 2117 (2024), which could impact the ability of administrative agencies like the Environmental Protection Agency (EPA) to adjudicate within the bounds of constitutional restraints. In this case, the Securities and Exchange Commission (SEC) initiated an administrative action against George Jarkesy for fraud charges brought under federal securities laws. The case was heard in front of an administrative law judge (ALJ), and an order against Jarkesy was issued. After SEC review of the ALJ decision, the order was upheld, but on appeal in the Fifth Circuit, the original removal of the hearing to an administrative court, consequently depriving Jarkesy of the right to a jury trial, was found to be in violation of the Seventh Amendment, in failing to meet the criteria for the public rights exception to Article III adjudication. This holding was affirmed in the majority opinion by Justice Roberts.

The public rights exception has traditionally granted agencies the power to resolve disputes through administrative procedures as necessary for processes integral to a public regulatory scheme. Prior to this decision, a matter of public rights arose ‘between the government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.’ This contingency of the government being a party for the exception, was what gave agencies the power to rely on the exception to utilize administrative courts. Justice Sotomayor’s dissent in the Jarkesy decision expressed that the majority ruling in the case diverting from this precedent serves to handicap agencies and make the exception less clear.

This Supreme Court decision has made clear some of the new limits to the scope of the exception: customs enforcement, the collection of revenue, immigration, regulation of foreign goods, relations with Indian tribes, public lands administration, and the grant of public benefits such as veterans’ payments, pensions, and patents. Arguably most ambiguous, there are the bounds of the grant of public benefits.

The EPA often utilizes ALJ proceedings for the assessment of civil penalties for violations of environmental laws, permit hearings, and enforcement actions. While Jarkesy did not answer whether all agencies have effectively lost their right to bring administrative proceedings, there are a few reasons to believe it will significantly affect the EPA. First, Jarkesy used analysis from Tull, which was regarding the Clean Air Act, and so it is likely a party contesting the EPA based on Jarkesy could argue the connection. Many environmental statutes are structured similarly to the Clean Air Act and thus face the same issue. Further, some environmental statutes give the EPA only administrative enforcement authority with no recourse in the federal courts.

Unlike in the other landmark administrative law case of the year, Loper Bright, the Court in Jarkesy did not address whether or not this ruling will apply retroactively. Taking a step back and looking at the big picture of what the Supreme Court is doing in administrative law; there may be receptivity to this argument.