On Wednesday, the Supreme Court will hear arguments in the case of Securities and Exchange Commission v. Jarkesy, which carries significant implications for the future of adjudications by federal agencies. The case centers on the review of a ruling that set aside a decision by the SEC, finding hedge fund manager George Jarkesy guilty of fraud for misrepresenting his financial position to investors. If upheld, the lower court's ruling could potentially result in the abolishment of agency proceedings across various federal agencies.

One of the primary grounds for contestation in this case is the argument put forth by Jarkesy that the SEC's decision must be invalidated since the agency sought civil penalties and disgorgement of unlawful gains in an agency proceeding rather than a federal court. Jarkesy contends that he should be entitled to a jury trial under the Seventh Amendment if monetary relief is being sought. Should the Supreme Court side with Jarkesy, agency proceedings seeking monetary relief, not just limited to the SEC, would cease to exist unless Congress acts to grant agencies the authority to bring cases in federal court. This severance of agency proceedings could result in an influx of cases in federal courts, potentially overwhelming the system and requiring additional resources.

Additionally, the Court of Appeals agreed with Jarkesy's claim that the SEC's choice to bring an agency proceeding or go to court, without clear instructions from Congress on how to decide, constituted an unconstitutional delegation of legislative power to a federal agency. The SEC, however, maintains that such choices fall under executive decisions, which are not subject to claims of excess delegation. If Jarkesy's argument prevails, it could mark the end of all agency adjudications, regardless of venue, as there are no current laws that impose limitations on forum selection based on constitutionally-required factors, as proposed by the 5th Circuit.

Furthermore, the 5th Circuit invalidated a provision of the 1946 Administrative Procedure Act that prevents administrative law judges (ALJs) from being fired except for good cause. This restriction ensures that ALJs remain independent from the agencies they work for. The 5th Circuit deemed this provision an unconstitutional limitation on the president's duty under Article II, section 3 of the Constitution to "take Care that the laws be faithfully executed." If the Supreme Court agrees with this ruling, it would grant the president the power to remove ALJs for any reason, removing their independence. The consequences of this decision remain uncertain, but Jarkesy's brief argues that agency proceedings should not take place if ALJs are not independent, which could effectively halt all such proceedings.

The outcome of the SEC v. Jarkesy case extends beyond the specific judgment against Jarkesy. It will determine whether agency adjudications can continue as they have for nearly eight decades or if they face extinction. The ruling comes at a time when challenges to agency rulemaking and deference to agencies are also being confronted, suggesting a potential shift in the powers and abilities of federal regulatory bodies.