{"database": "openregs", "table": "crs_reports", "rows": [["LSB11473", "Two Years After SEC v. Jarkesy: Overview of Selected Appellate Decisions", "2026-09-02T04:00:00Z", "2026-09-04T14:08:55Z", "Active", "Posts", "Daniel T. Shedd, Wen W. Shen", null, "In 2024, the Supreme Court decided Securities and Exchange Commission (SEC) v. Jarkesy. The Court held that the Seventh Amendment\u2014which provides a right to jury trial in common law actions\u2014prohibits the SEC from imposing civil penalties for securities fraud by way of a jury-less, in-house adjudication. Under Jarkesy, SEC instead must litigate such enforcement actions in Article III courts, where jury trials are available in cases subject to the Seventh Amendment and where different evidentiary and procedural rules apply. While the case specifically concerned SEC enforcement actions related to securities fraud, the Court did not cabin its holding to such actions. Thus, the decision raised potential questions regarding the constitutionality of numerous other enforcement schemes enacted by Congress that authorize agencies to pursue, through in-house tribunals, civil penalties and other remedies for noncompliance. \nIn 2026, the Court issued a decision in Federal Communications Commission (FCC) v. AT&T that determined that agency-issued orders to pay monetary fines are only subject to the Seventh Amendment constraints if they are binding. AT&T did not, however, provide additional guidance on determining whether a particular action is required to be heard in an Article III court in the first instance. In the two years since the Jarkesy decision, several appellate courts have considered Jarkesy-based challenges brought by various regulated entities subject to enforcement actions carried out through in-house adjudication proceedings. While some courts have rejected these challenges, other courts have concluded that certain enforcement schemes violate the Seventh Amendment or Article III of the Constitution under Jarkesy. This Sidebar begins with a background on the Seventh Amendment, its jury trial requirement and the public rights exception thereto, and Jarkesy. The Sidebar then provides an overview of selected post-Jarkesy appellate decisions and selected considerations for Congress.\nBackground on the Seventh Amendment and Jarkesy \nThe Seventh Amendment preserves \u201cthe right of trial by jury\u201d in \u201cSuits at common law, where the value in controversy shall exceed twenty dollars.\u201d The Supreme Court has explained that the term suits at common law embraces all actions that are \u201clegal in nature,\u201d meaning that it is the type of action that courts of law, rather than courts of equity (which historically sat without a jury and typically awarded nonmonetary relief such as injunctions), would hear. The Court, however, has recognized an exception to the Seventh Amendment for cases involving \u201cpublic,\u201d rather than \u201cprivate,\u201d rights. Such public rights cases are permitted to be heard outside of the Article III courts, where a jury would not be available. While the Court has not \u201cdefinitively explained\u201d this public rights exception, it has recognized that the exception includes certain \u201chistoric categories of adjudication,\u201d such as revenue collection, foreign commerce, immigration, tribal relations, public lands, public benefits, and patents.\nIn Jarkesy, the Court held that a statutory scheme in which the SEC could impose civil penalties for securities fraud through an in-house administrative proceeding (with either an administrative law judge or the Commission itself acting as decisionmaker) violated the Seventh Amendment. The Court first concluded that the Seventh Amendment was implicated because the action was \u201clegal in nature.\u201d The remedy was the \u201cmost important\u201d factor in this determination. Civil penalties, the Court explained, are designed to punish wrongdoing rather than to restore the status quo between the parties; they are, therefore, quintessentially legal, rather than equitable, in nature. While the presence of penalties was enough to establish the legal nature of the claim, the nature of the cause of action \u201cconfirmed\u201d the Court's conclusion. While \u201cnot identical,\u201d the Court recognized a \u201cclose relationship\u201d between securities fraud and historic common-law fraud. \nThe Court further held that the public rights exception did not apply to these SEC proceedings. The public rights exception, the Court cautioned, \u201chas no textual basis in the Constitution\u201d and must be treated \u201cwith care\u201d so as not to let it swallow the Seventh Amendment\u2019s general rule. When considering \u201cwhether the Seventh Amendment guarantees the right to a jury trial in the face of Congress\u2019 decision to allow a non-Article III tribunal to adjudicate\u2019 a statutory fraud claim,\u2019\u201d the Court explained that \u201cwhat matters is the substance of the action.\u201d In particular, the inquiry is whether the underlying claim \u201cpossess[es] a long line of common-law forebears.\u201d With respect to fraud, the Court observed that \u201claw courts have dealt with fraud actions since before the founding.\u201d In the Court\u2019s view, the fraud claim at issue in these SEC actions, like the statutory claim for fraudulent conveyance under the bankruptcy code at issue in Granfinanciera, S.A. v. Nordberg, involved \u201cclaims that traced their ancestry to the common law.\u201d In so holding, the Court did not overrule Atlas Roofing Co. v. Occupational Safety & Health Review Commission, which held that the public rights exception applied to civil penalty suits enforcing requirements of the Occupational Safety and Health Act of 1970 (OSH Act), a federal workplace safety law. In the Court\u2019s view, Atlas Roofing is inapposite because the statutory scheme there imposed federal safety standards that \u201cresemble[] a detailed building code\u201d and \u201cbring no common law soil with them,\u201d and thus the civil penalty suits \u201cinvolved a new cause of action, and remedies therefor, unknown to the common law.\u2019\u201d        \nOverview of Selected Post-Jarkesy Appellate Decisions\nSince Jarkesy, certain entities subject to various agency administrative enforcement actions have challenged those actions as violating the Seventh Amendment or Article III. Appeals court decisions issued to date have addressed questions left open by Jarkesy, including (1) whether and under what circumstances the \u201cpublic rights exception\u201d applies with respect to civil penalty enforcement actions and (2) whether and under what circumstances a case needs to be heard in an Article III court beyond the civil penalties context.  \nSelected Appellate Decisions Addressing the Public Rights Exception\nAt least four appellate courts have considered whether certain agencies\u2019 use of in-house administrative proceedings to assess civil penalties violated the Seventh Amendment\u2019s jury trial requirement. These actions sought to enforce requirements of various statutory schemes, including those regulating aviation safety, Medicare-participating nursing homes, migrant labor conditions, banking, and tobacco products. In analyzing the Seventh Amendment question in these cases, the appellate courts generally found that, under Jarkesy, actions for civil penalties are legal in nature and thus implicate the Seventh Amendment\u2019s jury trial requirement. The focus of the courts\u2019 analyses was, accordingly, whether the relevant enforcement actions fell within the public rights exception.\nSome appellate courts have interpreted Jarkesy\u2019s public rights exception inquiry to focus on whether the statute authorizing the action\u2014like the statutory schemes at issue in Granfinanciara and Jarkesy\u2014\u201cmerely repackage[d] (or assign to a different party) a common law cause of action\u201d or\u2014like the scheme at issue in Atlas Roofing\u2014created new requirements enforced by a \u201cnovel\u2019 enforcement scheme that would have been unknown to the common law.\u2019\u201d Relevant considerations in this inquiry include whether the enforcement action \u201ctarget[ed] the same basic conduct as\u201d well-recognized common law actions, \u201cemploy[ed] the same terms of art, and operat[ed] pursuant to similar legal principles.\u201d \nIn Axalta Coating Systems LLC v. Federal Aviation Administration (FAA), for instance, the U.S. Court of Appeals for the Third Circuit (Third Circuit) concluded that FAA\u2019s civil penalty action to enforce the Hazardous Materials Regulations\u2014which govern whether and how hazardous materials like flammable paint may be transported by aircraft\u2014\u201ccannot be distinguished from the enforcement action considered in Atlas Roofing.\u201d In particular, the court found that the relevant safety regulations, like the regulations at issue in Atlas Roofing, consist of detailed \u201ctechnical prescriptions for engaging in the regulated activity\u201d that did not \u201cbring . . . common law soil with them.\u201d Similarly, in Sligo Creek Center v. U.S. Department of Health & Human Services (HHS), the U.S. Court of Appeals for the Fourth Circuit held that a civil penalty action to enforce health and safety regulations that apply to Medicare-participating nursing homes falls within the public rights exception and could proceed through agency adjudication. The court found that, \u201c[a]s in Atlas Roofing, Congress did not merely repackage . . . a common law cause of action\u201d but instead \u201ccreated a detailed series of new requirements that apply only to skilled nursing facilit[ies]\u2019 that voluntarily participate in Medicare.\u201d The court further observed that \u201cthe obligations at issue here are . . . untethered to any injury.\u201d While \u201c[s]uits at common law to vindicate private rights required both injuria (a legal wrong) and damnum (actual, concrete harm),\u201d Congress has, under the relevant Medicare provision, \u201cauthorized HHS to take various actions\u2014including imposing monetary penalties\u2014even when no resident has suffered or is at immediate risk of suffering harm.\u201d\nIn contrast, in Sun Valley Orchard, LLC v. Department of Labor (DOL), the Third Circuit held that DOL\u2019s civil penalties action against a farm for breaching an employment agreement formed under a nonimmigrant visa program could not proceed through agency adjudication. The court acknowledged that the visa program, in authorizing domestic employers to temporarily hire foreign laborers to perform seasonal agricultural work, \u201cexists at the intersection of labor and immigration law,\u201d one of the areas of public rights identified by the Jarkesy court. The Third Circuit, however, observed that DOL\u2019s specific enforcement action was based on the petitioner farm\u2019s failure to provide, among other things, housing and kitchen access in accordance with the applicable job order that functions as a work contract between the farm and the laborer. Thus, the court concluded, DOL\u2019s action was therefore \u201clike a suit for breach of contract, which would have traditionally been heard in common law courts.\u201d\nOther appellate courts have interpreted Jarkesy to focus the public rights analysis on whether the enforcement action at issue implicates a public right of \u201ca serious and unbroken historical pedigree.\u201d Two appellate courts have applied this historical approach with different degrees of specificity. In Ortega v. Office of the Comptroller of the Currency (OCC), the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) considered whether OCC\u2019s civil penalties action against two bank officers for engaging in \u201cunsafe or unsound banking\u201d and breach of fiduciary duties in violation of 12 U.S.C. \u00a7 1818 fell within the public rights exception. Applying what it described as a \u201chistorical and categorical\u201d analysis, the court concluded that OCC\u2019s action is part of the regulation of federally insured and nationally chartered banks, a prerogative long subject to the exclusive domain of the non-Article III branches as evidenced by a review of statutory and legislative history of the major banking regulatory laws and relevant references in Supreme Court case law dating back to 1903. Therefore, the action could be adjudicated outside of an Article III court without access to a jury. In Bonan v. Federal Deposit Insurance Corporation (FDIC), the U.S. Court of Appeals for the Seventh Circuit considered a similar enforcement action initiated by the FDIC against a bank\u2019s board member. In the court\u2019s view, the public rights inquiry under Jarkesy turns on whether the relevant standards under \u00a7 1818 implicated any private rights subject to common law claims during the founding era. The court concluded, primarily based on review of several academic articles and relevant legislative history, that the \u201cunsafe or unsound practice\u201d standard \u201cbrings no common law soil with it, as the term likely emerged from nineteenth century state banking laws.\u201d The court further explained that, although the breach of fiduciary duty standard involved a duty that\u2014based on the court\u2019s review of relevant academic articles and case law references\u2014was recognized in equitable actions during the founding era, it \u201cd[id] not appear to have extended to bank directors.\u201d Based on these findings, the court concluded that the FDIC\u2019s enforcement action involved public rights that may be adjudicated by an agency without violating the Seventh Amendment.\nIn Texas Tobacco Barn, LLC v. HHS, the Fifth Circuit\u2014seemingly applying the \u201chistorical and categorical\u201d analysis\u2014held that HHS\u2019s civil penalties action against a seller of flavored vapes for selling unauthorized vape products in violation of the federal Food, Drug, and Cosmetic Act (FD&C Act) could not proceed through administrative adjudication. In the court\u2019s view, HHS\u2019s enforcement action \u201cis analogous to various common law actions,\u201d including \u201cthe common law action for trespass-on-the-case,\u201d which \u201clay against the unwholesome practices\u2019 of selling bad provisions or wine,\u2019\u201d and \u201cthe common law cheat action\u201d against those who provided false representations of superior quality. The court further concluded that the public rights exception did not apply because \u201cHHS does not demonstrate that adjudicating violations of public-health regulations historically could have been determined exclusively by [the executive and legislative] branches.\u2019\u201d In doing so, the court rejected the government\u2019s argument that the FD&C Act \u201cestablish[ed] a novel and comprehensive scheme for the regulation of tobacco products\u201d and thus established a claim \u201cunknown to the common law.\u2019\u201d\nThe Supreme Court has granted the government\u2019s petition for certiorari in Sun Valley to consider certain questions, including whether DOL may collect monetary remedies through agency adjudication in the context of the visa program. As of the publication date, the time for filing petitions for certiorari in Bonan and Texas Tobacco Barn has not expired.\nApplying Jarkesy Outside the Civil Penalties Context \nThe above cases discuss the application of Jarkesy to agency enforcement actions involving civil monetary penalties\u2014actions \u201cat law\u201d that implicate the Seventh Amendment. However, in March 2026, the Fifth Circuit, in Intuit, Inc. v. Federal Trade Commission (FTC), determined that Jarkesy\u2019s scope reached beyond legal actions and had implications for actions in equity\u2014a type of action that would not implicate the Seventh Amendment. The case involved an in-house adjudication that the FTC brought against Intuit for \u201cdeceptive\u201d advertisements under Section 5 of the Federal Trade Commission Act. After an adjudication conducted by an Administrative Law Judge (ALJ), the FTC found that Intuit\u2019s advertisements were \u201clikely to mislead at least a significant minority of reasonable consumers.\u201d Unlike in Jarkesy, where the SEC issued civil monetary penalties, the FTC issued a cease-and-desist order, an equitable remedy, prohibiting Intuit from advertising its goods or services as free for the next twenty years. Intuit appealed the order to the Fifth Circuit claiming, among other things, that the \u201cFTC unlawfully adjudicated private rights\u2019 before an ALJ rather than in an Article III court.\u201d\nThe Fifth Circuit applied Jarkesy to hold that actions involving private rights, regardless of whether the action is legal or equitable, must be heard in an Article III tribunal. The court first established that Article III provides that the judicial power extends \u201cto all Cases, in Law and Equity, arising under this Constitution, [and] the Laws of the United States\u201d (emphasis added). It then explained that for an action to be permissibly heard outside of an Article III court, the action must fall under the public rights exception. The court conducted a public rights analysis, finding that FTC\u2019s deceptive advertising claims closely resembled traditional causes of action, such as deceit and fraud, available in courts of equity and common law. The court emphasized that the deceptive advertising claims targeted the same basic conduct, employed the same terms, and operated by similar legal principles as these traditional causes of action. Further, it found that the remedy\u2014a cease-and-desist order\u2014was tantamount to an injunction, a traditional equitable remedy. Additionally, the court distinguished the case from Atlas Roofing by explaining that \u201ca blanket prohibition on unfair or deceptive acts or practices\u2019\u201d under the FTC Act \u201cdoes not remotely resemble[] a detailed building code\u2019 like the workplace standards promulgated under the OSH Act.\u201d The court concluded that \u201cthe agency must therefore redress deceptive advertising in Article III courts.\u201d\nThus, although Jarkesy was largely framed as a Seventh Amendment case by the Supreme Court, the Fifth Circuit appears to view the case as establishing what actions must be heard by an Article III court regardless whether the Seventh Amendment would apply. For the Fifth Circuit, the distinction between law and equity, although relevant for a Seventh Amendment analysis, does not control whether the action must be heard by an Article III court in the first instance. As the Fifth Circuit stated, \u201c[b]ecause Article III expressly confers exclusive jurisdiction on federal courts over cases that sound in law and equity, any distinction would only become relevant if Intuit claimed a right to a jury trial under the Seventh Amendment.\u201d The government did not seek Supreme Court review of the Fifth Circuit\u2019s decision.  \nConsiderations for Congress\nIn the wake of Jarkesy, some argued that Congress, if it seeks to ensure compliance with the Seventh Amendment, might consider whether to change the adjudication procedures for numerous federal agencies. In the two years since Jarkesy, lower courts have applied the case with different results. With respect to the public rights exception, for instance, some courts have defined a standard that may be more likely to preserve agencies\u2019 ability to administratively enforce requirements of statutory schemes that do not borrow directly from common law causes of action, while other courts have applied a \u201chistorical and categorical\u201d analysis that could more broadly limit the scope of public rights enforceable by administrative adjudication. Although the Supreme Court may further clarify the applicable standard for the public rights exception in Sun Valley, other open questions not at issue in that case may remain. Despite these uncertainties, Congress might consider several options when addressing agency enforcement authorities going forward.\nOne consideration for Congress is whether to bolster agencies\u2019 options for enforcement should their in-house adjudicative processes be deemed unconstitutional. Although many agencies, like the SEC, have authority to pursue civil penalties in either federal court or through in-house adjudication, some agencies only have the authority to adjudicate civil penalties in house. For example, Justice Sonia Sotomayor, in her Jarkesy dissent, stated that \u201cthe Occupational Safety and Health Review Commission, the Federal Energy Regulatory Commission, the Federal Mine Safety and Health Review Commission, [and] the Department of Agriculture,\u201d among other agencies, \u201ccan pursue civil penalties only in agency enforcement proceedings.\u201d If a court rules those actions unconstitutional, those agencies\u2019 ability to take enforcement actions may be significantly curtailed without further congressional authorization. Congress may consider amending the organic acts of these agencies to allow them to bring enforcement actions in federal court to ensure that they are still able to pursue potential violators. Similarly, when crafting new enforcement systems, Congress may consider whether to empower agencies to bring claims in court, rather than solely providing administrative enforcement authority. \nIn FCC v. AT&T, the Supreme Court established that the government does not violate the Seventh Amendment if an agency action does not determine any legal rights or obligations on a party prior to a trial de novo. Under AT&T, it appears that enforcement mechanisms whereby agencies investigate and hold informal hearings with regulated parties to determine compliance with statutory and regulatory requirements are permissible, so long as the government is \u201crequired to prove its case to a jury\u201d before collecting penalties. This, arguably, permits an agency to develop facts and make preliminary assessments before forwarding the case to the Department of Justice for ultimate enforcement. Following the Court\u2019s decision, Congress could, if it sought to do so, emulate this enforcement scheme in future statutes or when revising existing laws to bring them in compliance with the Seventh Amendment.\nCongress might also be able to minimize the constitutional issues associated with administrative enforcement actions by providing an option for individuals subject to such enforcement actions to remove the proceeding to federal court. Arguably, this could cure the constitutional issue because proceedings would only occur outside of an Article III court if the litigants agreed to the administrative forum. The Fifth Circuit, in the Intuit decision, highlighted that non-Article III adjudication has, at least in some instances, been viewed favorably when the parties consent to the forum. Proposals to this effect have been introduced in the 119th Congress. Under these proposals, litigants desiring a jury trial or other Article III procedural protections could remove an administrative action to federal court, while other litigants who may favor the less expensive and potentially expedited administrative proceedings could agree to have their cases heard before the agency. ", "https://www.congress.gov/crs_external_products/LSB/PDF/LSB11473/LSB11473.2.pdf", "https://www.congress.gov/crs_external_products/LSB/HTML/LSB11473.html"]], "columns": ["id", "title", "publish_date", "update_date", "status", "content_type", "authors", "topics", "summary", "pdf_url", "html_url"], "primary_keys": ["id"], "primary_key_values": ["LSB11473"], "units": {}, "query_ms": 0.5114589584991336, "source": "Federal Register API & Regulations.gov API", "source_url": "https://www.federalregister.gov/developers/api/v1", "license": "Public Domain (U.S. Government data)", "license_url": "https://www.regulations.gov/faq"}