Recent decisions from the U.S. Supreme Court are disrupting the administrative state. In the same term that the Court overruled the Chevron deference doctrine in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 2273 (2024), the Court’s decision in Securities and Exchange Commission v. Jarkesy, 144 S. Ct. 2117, 2139 (2024), questions the authority of federal administrative agencies to continue long-standing civil enforcement practices—specifically, agency adjudications for civil penalties, such as enforcement of Clean Water Act penalties.
In Jarkesy, Chief Justice Roberts, writing for the majority, held that the Seventh Amendment to the U.S. Constitution, which guarantees defendants a right to a jury trial in certain civil matters, entitles a defendant to a jury trial when the Securities and Exchange Commission (SEC) seeks civil penalties for securities fraud. Although the decision directly applies only to the SEC’s in-house adjudication system, it likely reaches far beyond the SEC to all civil penalty adjudications that are entitled to a jury trial. Thus, Jarkesy will force civil enforcement cases under numerous federal laws out of administrative agencies and into federal court. Its effect on state administrative agencies’ authority is less direct. Nevertheless, Jarkesy’s impact on state agency civil enforcement authority could be broad and will likely affect states’ enforcement of environmental programs. Multiple states follow federal Seventh Amendment jurisprudence to interpret a state constitutional jury right. Indeed, state constitutional rights to a jury trial are often broader than the federal constitutional right, and state courts could rely on Jarkesy to expand respective state jury rights to require civil actions for state environmental enforcement.
This article explores the potential impact of Jarkesy on environmental hearing boards and in-house environmental administrative law judges (ALJs) that frequently hear civil penalty claims. Because the practice of hearing environmental penalty cases within the administrative state is commonplace, Jarkesy could significantly disrupt long-standing environmental enforcement procedures across the country.
In Jarkesy, a hedge fund owner, George Jarkesy, was found liable for securities fraud in an adjudicative hearing by an SEC in-house ALJ. An SEC commission affirmed the fraud finding, including the imposition of penalties, without a jury. Jarkesy challenged the constitutionality of the SEC’s ALJ adjudication scheme, arguing that it violated his Seventh Amendment right to a jury trial.
The Supreme Court held that the SEC’s ALJ adjudication of civil penalties was unconstitutional and followed its standard two-part test to determine whether the Seventh Amendment civil jury right applied to the statutory claim. First, the Court examined whether the statutory fraud claim resembled a common law cause of action, determining that the statutory claims against Jarkesy closely resembled common law fraud. Jarkesy, 144 S. Ct. at 2130. Second, the Court examined whether the remedy was “legal in nature,” triggering the Seventh Amendment right to a jury trial. Id. at 2131. A claim that is legal in nature is designed to punish the wrongdoer and to go beyond restoration of the status quo. Of the two parts of the test, the second question—regarding remedy—is the more important; a punitive remedy may be dispositive. The SEC’s pursuit of penalties under the fraud statute was meant to deter and punish—not to compensate the victims of Jarkesy’s fraud—and so the Court determined that the remedy was legal in nature and required adjudication by a jury in an Article III court.
The Seventh Amendment civil jury right is not absolute. The Supreme Court has recognized a public rights exception in situations that implicate revenue collection by the treasury, customs law, immigration law, relations with Indian tribes, administration of public lands, and public benefits such as veterans’ payments, pensions, and patent rights. Id. at 2133. The contours of the exception have never been crystal clear, and Jarkesy does not provide a specific definition. In fact, Justice Sotomayor’s dissent noted that “it is almost impossible to discern how the majority defines a public right[.]” Id. at 2164 (Sotomayor, J., dissenting). Despite that critique and without supplying a definition, the majority determined that the public rights exception did not apply to the SEC’s adjudication of the fraud claims against Jarkesy. Ultimately, the Court held that the SEC’s ALJ adjudication of statutory fraud claims to assess civil penalties violated the Seventh Amendment. The opinion concluded that the Constitution demands that the roles of prosecutor, judge, and jury be separate, not concentrated in an executive agency. Id. at 2139.
Although directly binding only on the SEC, Jarkesy suggests that no federal agency can adjudicate a statutory claim that is analogous to a claim found at common law without a jury when the monetary remedy is punitive.
And certain environmental civil penalties are punitive. For example, the Supreme Court decided in 1987 that Clean Water Act civil penalty liability is entitled to a jury trial because the civil penalty is punitive. Tull v. United States, 481 U.S. 412 (1987). In that case, EPA sued a real estate developer, Edward Tull, in federal court under the Clean Water Act for injunctive relief and civil penalties. Tull’s request for a jury trial on the civil penalties issue was denied. The Supreme Court held that Tull had a Seventh Amendment right to a jury trial for the civil penalty claims because the penalties were punitive and did not restore the status quo. Id. at 422–25.
The Jarkesy majority relied on Tull for the proposition that statutory civil penalties implicate a legal right that entitles a defendant to a jury trial, if the underlying claim is akin to a claim found at common law. Jarkesy, 144 S. Ct. at 2128–30. The Court did not specify whether Tull applies regardless of whether the agency pursues a civil penalty claim in an Article III court, before an ALJ, or other in-house adjudication. The dissent took issue with the majority’s broad reading of Tull, describing Tull as standing for the “unremarkable” principle that the Seventh Amendment entitles a defendant to a jury trial when the government elects to sue for civil penalties in an Article III court. Id. at 2167 (Sotomayor, J., dissenting). Nonetheless, the majority’s broad reliance on Tull likely confirms that Clean Water Act civil penalty cases implicate a legal right, regardless of where the agency brings the claim.
Jarkesy thus casts significant skepticism on the ability of federal environmental agencies—especially the U.S. Environmental Protection Agency (EPA)—to engage in civil penalty adjudication outside of Article III courts. This result has significant implications for environmental civil enforcement cases, which are often adjudicated before in-house ALJs and the Environmental Appeals Board (EAB), an impartial administrative appeals tribunal within the EPA.
Moreover, the decision’s significance reaches far beyond the Clean Water Act. Numerous other environmental laws, such as the Clean Air Act, Endangered Species Act, Comprehensive Environmental Response Compensation and Liability Act, and others, include civil penalty provisions analogous to the Clean Water Act’s. Relying on Jarkesy and Tull, defendants are likely to argue that the Seventh Amendment requires a jury to hear civil penalty claims brought under these statutes. If courts agree that these other statutes’ civil penalties are akin to claims found at common law, thus triggering the Seventh Amendment, the EPA will effectively be able to use its long-standing administrative enforcement procedures, relying on ALJs and the EAB, only when it seeks to impose injunctions. All civil penalty assessments would have to go to federal court, through the Department of Justice, unless the alleged environmental violator waived their right to a jury trial.
Importantly, not all environmental statutes allow the EPA to pursue penalties in an Article III court. For example, the civil penalties provisions in the Federal Insecticide, Fungicide, and Rodenticide Act and Toxic Substances Control Act allow for penalties to be assessed solely by the EPA administrator—the statutes do not provide for original jurisdiction in an Article III court. 7 U.S.C. § 136l; 15 U.S.C. § 2615. And other agencies, such as, for example, the Federal Energy Regulatory Commission, may only assess certain civil penalties through agency enforcement proceedings. 16 U.S.C. § 823b(c). After Jarkesy, it is unclear how an agency could assess civil penalties under these statutes or others that do not provide for original Article III jurisdiction. To quote Justice Sotomayor, the best advice to agencies that want to enforce these statutes going forward is “tough luck; get a new statute from Congress.” Jarkesy, 144 S. Ct. at 2174 (Sotomayor, J., dissenting).
Beyond the logical extension of Jarkesy to the EPA’s adjudication of civil penalties, the case could reach state environmental enforcement dockets. States have delegated authority to implement and enforce multiple federal environmental statutes, and, of course, state agencies pursue penalties under state laws that frequently go further than the counterpart federal law. Numerous states, including Washington, New York, and California, use environmental hearings boards or in-house agency procedures to adjudicate environmental enforcement claims, including claims for monetary penalties, related to clean water, air, endangered species, hazardous waste, and more. Jarkesy threatens these long-standing procedures.
Many states have received delegated authority to implement and enforce state-law versions of the federal environmental laws like the Clean Water Act. While neither the Seventh Amendment nor Jarkesy directly applies to state agencies and state courts, defendants could still use Jarkesy to argue for a constitutional right to a jury trial in environmental enforcement cases brought by state agencies under state laws. First, defendants might seek to overturn precedent, holding that the Seventh Amendment does not apply to states. The Court’s seminal case on the subject, Minneapolis & St. Louis R. Co. v. Bombolis, 241 U.S. 211 (1916), is more than 100 years old and more recent cases, such as Jarkesy, suggest a change in how the Court might view the Constitution’s applicability to state laws. Second, even if that holding is not revisited, Jarkesy might influence state courts to find a right to a jury trial under state constitutions. Numerous state constitutions provide a right to a jury trial, and many state supreme courts either follow federal Seventh Amendment jurisprudence to interpret the state constitutional jury right or read the state right to provide an even more expansive right to a jury than does federal law. Thus, a defendant facing a state’s environmental claims for monetary penalties may argue that Jarkesy strongly suggests that the relevant state constitution also should require that the claims be brought in court before a jury.
It is hard to overstate how disruptive this application of Jarkesy would be. Numerous state constitutions, such as those of California, Connecticut, Georgia, Indiana, and Washington, incorporate an “inviolate” right to a jury trial in civil matters. See, e.g., Cal. Const. art. I § 16 (“Jury Trial”); Conn. Const. art. 1 § 19; Ga. Const. art. I § I, para. XI(a); Ind. Const. art. I § 20(a); Wash. Const. art. I § 21 (“Trial by Jury”). It is hardly surprising that so many states place high value on the right to a civil jury trial because, as Justice Gorsuch points out in his Jarkesy concurrence, the right to a jury trial has been fundamentally baked into the concept of due process going back to the founding of the United States. Jarkesy, 144 S. Ct. at 2140 (Gorsuch, J., concurring).
As an example, the Washington State Constitution dictates that “the right of trial by jury shall remain inviolate[.]” Wash. Const. art. I § 21. The Washington Supreme Court interprets the right to a jury trial broadly—arguably more broadly than the federal Seventh Amendment. See Sofie v. Fibreboard Corp., 112 Wash. 2d 636, 642 (1989) (en banc) (explaining that the term “inviolate” in the language of the Washington Constitution’s right to a jury in a civil matter “connotes deserving of the highest protection”).
Notwithstanding this inviolate right to a jury trial, the Washington State Department of Ecology enforces civil penalties for violations of the state’s version of the Clean Water Act, Model Toxics Control Act, and various other environmental statutes through in-house administrative adjudications. Appeals from civil penalties issued by Ecology go to the Washington State Pollution Control Hearings Board (PCHB), a three-member panel appointed by the governor. There is no right to a jury before the PCHB.
To date, Washington’s environmental administrative adjudication procedures have gone largely unchallenged. However, the reasoning in Jarkesy provides ammunition to defendants to challenge Ecology’s and the PCHB’s authority to adjudicate civil penalties as a violation of the “inviolate” right to a jury trial.
This same reasoning applies to California, another state with an “inviolate” constitutional right to a jury trial in civil matters. California code allows for agency adjudication of civil penalties for violations of several state environmental laws. For example, the California Department of Fish and Wildlife is authorized to assess “administrative” penalties for violations of the California Endangered Species Act without a jury trial. Cal. Fish & Game Code § 2582. Similarly, the California Department of Toxics Substances Control may assess civil penalties for violations of various environmental and consumer protection regulations without a jury trial. Cal. Code Regs. tit. 22, §§ 66272.60–66272.69. It is now an open question of whether California may still assess civil penalties in this manner after Jarkesy.
Even in states that do not interpret their respective state’s constitutional right to a jury trial as broadly, Jarkesy could expand skepticism of in-house adjudication of monetary penalty cases. For example, the New York Court of Appeals has considered the possibility that, given the right facts, “a given civil penalty, if punitive, could engender additional constitutional protections, including, specifically, the right to a jury trial.” Dep’t of Hous. Pres. & Dev. of City of New York v. Deka Realty Corp., 208 A.D.2d 37, 50 (N.Y. 1995). The inquiry would depend on “an examination of the statutory language, structure and intent, including a particularized assessment of the penalty imposed and the purposes that the penalty may fairly be said to serve.” Id. Jarkesy could influence that inquiry and upend New York’s long-standing in-house adjudication procedures for environmental civil enforcement cases. The New York Department of Environmental Conservation (NYDEC) enforces numerous state environmental regulations, ranging from water discharge permitting, to endangered species, to mineral resources and others. NYDEC imposes civil penalties subject to its “Uniform Enforcement Hearing Procedures,” which provide for a hearing before an ALJ but no jury. N.Y. Comp. Codes R. & Regs. tit. 6, pt. 622. Citing Deka and Jarkesy, a defendant could argue an enforcement agency’s claim for environmental civil penalties triggers a state constitutional right to a jury trial.
Even states that use courts to adjudicate environmental penalties may find Jarkesy disruptive. Both Vermont and Hawai’i have environmental divisions within the state court system. In Vermont, the environmental court hears appeals from environmental matters adjudicated by state agencies. Vt. Stat. Ann. tit. 4, § 34. In Hawai’i, the environmental court has original jurisdiction over various state environmental laws and regulations such as the Hawai’i Safe Drinking Water Act, Air Pollution Control, and Fishing Rights and Regulations. Haw. Rev. Stat. § 604A. Neither the Vermont nor the Hawai’i environmental courts offer jury trials. Thus, while these states’ procedures satisfy the separation of powers concerns raised by Jarkesy, they do not address the central holding that a jury right applies to claims for punitive monetary damages.
Although limited on its face to SEC enforcement of federal securities laws, Jarkesy throws into question long-standing procedures that state environmental agencies use to adjudicate civil penalty cases arising under federal and state environmental laws. States will likely vary in their responses to Jarkesy, but litigation over the state law right to a jury trial is inevitable.
The Court in Jarkesy arguably went beyond allowing for a right to a jury trial for civil penalties and made it a requirement. The Court stated that “[i]f a suit is in the nature of an action at common law, then the matter presumptively concerns private rights, and adjudication by an Article III court is mandatory.” Jarkesy, 144 S. Ct. at 2132. Moreover, “[o]nce [a suit at common law] is brought within the bounds of federal jurisdiction, an Article III court must decide it, with a jury if the Seventh Amendment applies.” Id. at 2123. This language is not discretionary and raises a subsidiary issue: After Jarkesy, may a defendant subject to a statutory claim for civil penalties waive the right to a jury trial, either in court or to accept in-house agency adjudication of the matter?
The Jarkesy majority’s apparently strict holding is contrary to the routine practice of defendants waiving their right to a jury trial and is particularly significant where the underlying statute provides adjudicative options. For example, many environmental statutes, such as the Clean Water Act, allow civil penalty cases to be brought in an administrative adjudication or in court. 33 U.S.C. § 1319. Jarkesy appears to hold that, if the statutory claim for civil penalties is analogous to a common law claim, the government must pursue adjudication in court before a jury.
However, there are plenty of reasons a defendant may prefer to have a matter tried out of court or without a jury. For instance, an ALJ with environmental expertise may offer experience and efficiency that will shorten the adjudication and reduce defense costs. Moreover, defendants facing a relatively smaller penalty may choose to represent themselves pro se in procedures before an ALJ or environmental board that may be easier to navigate than federal court.
Based on these considerations as well as the sheer cost of jury trials to the judiciary, courts may be inclined to allow defendants to waive jury trials. However, these arguments may be far less persuasive than the words of the Jarkesy majority disfavoring or even barring waiver.
Jarkesy’s potential to disrupt environmental enforcement is significant, but the full impact will not be determined until defendants, agencies, and courts grapple with numerous questions about the case’s application to administrative enforcement procedures.
First, despite the Jarkesy majority’s reliance on Tull and that case’s holding regarding Clean Water Act civil penalties, it is far from clear that every environmental civil penalty claim implicates the Seventh Amendment. Courts will have to determine, in any challenge to an in-house adjudication of an environmental civil enforcement matter, whether the underlying statutory claim is analogous to a claim found at common law. Is a pollution-related penalty claim akin to a nuisance claim? Or is the underlying statute so novel that there is no analogous common law claim? Or does the undefined public rights exception apply? It will take years to determine the full impact of Jarkesy. Moreover, the U.S. Court of Appeals for the Fifth Circuit decided in favor of Jarkesy on other grounds, beyond the Seventh Amendment. Jarkesy v. Sec. & Exch. Comm’n, 34 F.4th 446, 449 (5th Cir. 2022) (determining, in addition to finding the SEC’s in-house adjudication violated Jarkesy’s Seventh Amendment right to a jury trial, that Congress unconstitutionally delegated power to the SEC in violation of Article I of the U.S. Constitution and that the statutory removal restrictions on SEC ALJs violate the Take Care Clause of Article III). It remains to be seen whether the claims that the Supreme Court left unaddressed also could undermine administrative adjudications.
Second, Jarkesy may present an opportunity for state courts to distinguish state constitutions’ civil jury right from the federal Seventh Amendment. As such, defendants relying on Jarkesy to seek a jury trial in state court may not get the answer they are hoping for.
Third, courts are already overburdened. As Justice Sotomayor points out in her Jarkesy dissent, if numerous types of actions that have traditionally been handled in-house or by hearings boards need to be tried before a jury, the result will be a deluge of cases for the already resource-constrained judiciary. Overcrowded dockets, of course, mean longer waits for trials and delayed resolutions of claims. While we focus on environmental claims, Justice Sotomayor calculated that over 200 statutes authorize more than two dozen agencies to impose civil penalties for statutory violations, including the Department of Agriculture, the Federal Energy Regulatory Commission, the Occupational Safety and Health Administration, the Consumer Financial Protection Bureau, the Department of Education, the Federal Maritime Commission, the Federal Communications Commission, and the Postal Service. Jarkesy, 144 S. Ct. at 2155 (Sotomayor, J., dissenting). If these agencies and more now must turn to Article III courts to impose civil penalties, Jarkesy will lead to delays for all sorts of claims. This theory also extends to state court in a state that applies Jarkesy to expand its jury right. In other words, it would not just be state environmental cases being moved to state court; civil penalty cases of all kinds could move from various in-house adjudication processes to overcrowded court dockets.
Fourth, requiring that environmental claims be tried in front of a jury will force already resource-constrained environmental agencies to reevaluate enforcement priorities. Conversely, because Jarkesy may prohibit waiver, a defendant that might otherwise have fought an enforcement claim may consider settling to avoid a protracted court case. Alternatively, a defendant that feels an agency is overstepping its authority or denying due process may find the time and resources to pursue a jury trial and rely on Jarkesy to argue for the right.
Finally, it is important to note that Jarkesy does not spell the end of environmental ALJs or in-house adjudication at the federal or state level. Agencies frequently decide matters in administrative adjudications that are not implicated by the Jarkesy decision at all, such as permitting disputes, reimbursement of costs at hazardous waste sites, and challenges to certain regulations. Attorneys must be ready to explain what Jarkesy may impact, and what it may not, to clients facing environmental enforcement cases.
Jarkesy arguably left open more questions than it answered, especially because it could impact state environmental agency enforcement of civil penalties. The potential disruptions to long-standing adjudication procedures are significant, and regulatory agencies, defendants, and courts will be answering how the decision applies to environmental litigation for years to come.
