In a significant legal battle that could have far-reaching implications for the Securities and Exchange Commission (SEC) and the power of federal agencies, the case of SEC v. Jarkesy is set to be heard by the Supreme Court on November 29. The case centers around the constitutionality of the SEC's system to protect investors from fraud and raises questions about the unitary executive theory and the role of administrative law judges.

Last year, the United States Court of Appeals for the Fifth Circuit, dominated by Trump appointees, ruled that the SEC's system to safeguard investors is unconstitutional in three distinct ways. This decision aligns with a pattern of the Fifth Circuit handing down questionable decisions aimed at undermining core governmental functions.

If the Supreme Court were to affirm the Fifth Circuit's decision, it could potentially enable former President Donald Trump or future presidents to fill the federal civil service with loyalists. The unitary executive theory, a pet project of the conservative Federalist Society, asserts that the president should have extensive authority to fire government employees who do not swear personal loyalty.

The Jarkesy case specifically challenges the SEC's use of administrative law judges, who are civil servants hired through a merit-based selection process. These specialized judges hear cases brought by federal agencies, providing impartial decisions with robust job security protections. The case involves George Jarkesy, a hedge fund manager accused of multiple violations of federal securities law, including misrepresentation of investment strategies and inflating holdings' values.

Jarkesy's objections to the SEC's enforcement proceeding revolve around the choice of venue, arguing that the ability to bring the case before an administrative law judge instead of an Article III court is unconstitutional. However, laws allowing litigants to select the appropriate venue are common in various legal disputes.

One of Jarkesy's constitutional objections is based on the largely defunct doctrine of "nondelegation," which challenges Congress's ability to delegate decision-making power to federal agencies. However, the Supreme Court has rarely invalidated laws under this doctrine and has upheld federal law enforcement agencies' authority to make consequential decisions.

Jarkesy's second argument raises concerns about the violation of the Seventh Amendment, which guarantees the right to a jury trial in civil suits. However, the rules governing civil suits and the need for jury trials are complex, and administrative law judges, who possess expertise in specialized areas such as securities fraud, typically do not conduct jury trials.

A central aspect of Jarkesy's case revolves around the unitary executive theory, contending that the SEC's action against him infringes upon the president's authority over the executive branch. The theory advocates for the president's command and control of the entire executive branch, potentially leading to broad powers to fire government employees for political reasons. However, the distinction between policymaking officials and non-policymaking officials, such as administrative law judges, is crucial in assessing the reach of the theory.

The Supreme Court's current conservative majority has expressed sympathy towards the unitary executive theory, raising concerns about potential outcomes of the Jarkesy case. Yet, the Court's previous actions have mostly resulted in symbolic rather than substantial changes to the structure of the federal government in relation to this theory.

If the Supreme Court upholds the Fifth Circuit's decision in Jarkesy, it could have a profound impact on the SEC and other federal agencies that rely on administrative law judges. The potential consequences include the erosion of the government's ability to adjudicate cases fairly and impartially, transforming proceedings that should be nonpartisan into politically driven ones.

With the Supreme Court's review of this landmark case on the horizon, the future of the SEC's investor protection framework hangs in the balance, and the broader implications for the unitary executive theory may shape the future of the federal government and civil service as well.